2007 (3) TMI 113 - AT - Central Excise

Cenvat/Modvat credit - Appellant contended that the entitle for the 50% of the Cenvat credit in subsequent financial year on the ground that the fixtures are accessory - Appellant not provide any evidence in support of his contention and accordingly credit denied

Summary

Issues: Modvat credit entitlement, Interpretation of Rule 4(2)(b) of Cenvat Credit Rules, Denial of credit, Limitation period for availing credit, Imposition of penalty

In this judgment by the Appellate Tribunal CESTAT, Mumbai, the main issue revolves around the Modvat credit entitlement of 50% duty paid on capital goods in the subsequent financial year. The Rule 4(2)(b) of Cenvat Credit Rules, 2007 allows an assessee to claim 50% credit in the same financial year of receiving the capital goods, with the remaining 50% available in the following year if the goods are in possession. The appellants received fixtures in 2001-2002, availed 50% credit that year, and claimed the balance in 2002-2003, even though the fixtures were no longer in their possession. The revenue denied the balance credit, imposed penalties, and confirmed interest amounting to Rs. 68,914.

One ground of challenge was the appellants' argument that fixtures received and sent back to customers were accessories, not subject to possession conditions for claiming the balance credit. However, the Commissioner (Appeals) ruled that possession and use conditions are essential unless the capital goods fall under specified exceptions in Rule 4(2)(b). The appellants failed to prove the fixtures were components, spares, or accessories, and as they were crucial for manufacturing chassis, they were rightly considered capital goods. Consequently, the denial of the balance credit was upheld.

Regarding the limitation period for availing credit, the appellants contended that all relevant information was disclosed in ER-1 returns and Cenvat accounts, but they were not advised by revenue on credit eligibility. The tribunal found that the appellants took credit without entitlement, did not seek advice, and did not independently inform the revenue, supporting the revenue's case of unauthorized credit availing. The confirmation of duty was upheld due to these factors.

The tribunal, however, reduced the penalty imposed from 100% to a token amount of Rs. 5,000, considering the circumstances. Despite this modification, the appeal was rejected. The judgment was pronounced on 16-3-2007.