2013 (10) TMI 1319 - AT - Central Excise

Benefit of Notification Nos. 29/2004 and 30/2004 - Denial of CENVAT Credit - Held that - Entire show cause notice asking the appellant to reverse the Cenvat credit proportionate to the value of the goods cleared by claiming benefit under notification 29/2004 is misdirected, inasmuch as, it is on records that the appellant has availed the Cenvat credit of all the items of capital goods. It is also on record that appellant has taken credit of 50% of the Central Excise duty in the first year and balance 50% in the second year. We find that the Cenvat credit availed by the appellant on the said capital goods or the consumables which are used in the capital goods, are eligible. The entire case of the Revenue is totally on the wrong footings, inasmuch as the capital goods which were put to use by the appellant were for the manufacturing of the same product which are eligible for exemption as well as for discharge of duty liability under Notification No. 29/2004 and 30/2004. - Decided in favour of assessee.

Summary

Issues:
- Ineligibility of availing Cenvat credit on parts of capital goods
- Misdirection in asking the appellant to reverse Cenvat credit proportionate to the value of goods cleared under specific notifications

Analysis:
1. Ineligibility of availing Cenvat credit on parts of capital goods:
The issue in this case revolves around the appellant's availing of Cenvat credit on parts of capital goods used for manufacturing both dutiable and exempted goods. The Revenue contended that the appellant, a manufacturer of Texturised Yarn, is not eligible for exemption on goods cleared under specific notifications if they have taken Cenvat credit on consumable parts of capital goods. However, the Tribunal found that there is no dispute regarding the eligibility of the goods for Cenvat credit. The Tribunal concluded that there should be no denial of Cenvat credit to the appellant as the goods are indeed eligible for availment of such credit.

2. Misdirection in asking the appellant to reverse Cenvat credit proportionate to the value of goods cleared under specific notifications:
Upon reviewing the records, it was observed that the appellant had availed Cenvat credit on various items like measuring instruments, ball bearings, belts, valves, ceramic dyes, etc., which are parts of the machinery used for manufacturing Texturised Yarn. The appellant had also claimed benefits under specific notifications for the final products manufactured and cleared. The Tribunal noted that the show cause notice asking the appellant to reverse Cenvat credit proportionate to the value of goods cleared under the notifications was misdirected. It was evident from the records that the appellant had correctly availed Cenvat credit on all items of capital goods and consumables used. The Tribunal highlighted that the Revenue's case was based on incorrect assumptions, as the capital goods were utilized for manufacturing products eligible for exemption and duty liability discharge under specific notifications.

In conclusion, the Tribunal found no valid reason to uphold the impugned orders and decided to set them aside, thereby allowing the appeal filed by the appellant. The judgment emphasized the eligibility of the appellant to avail Cenvat credit on the capital goods and consumables used in manufacturing, dismissing the Revenue's contentions as misplaced and confused.