2011 (2) TMI 477 - HC - Central Excise

Cenvat credit on capital goods - Utilization of Cenvat credit in the subsequent year of availment - As the assessee had not yet registered its Unit under the Rules, the assessee was not entitled to utilize Cenvat credit in the year of acquiring the same - Rule 4(2)(a) of the Cenvat Credit Rules provides that only to the extent of 50% of the Cenvat Credit could be utilized by the assessee during the year it is availed of - Hence, the said Rules do not mandate that the credit should be utilized in the very same year. Once the credit is not utilized in the same year, then Rule 4(2)(b) provides that it can be utilized in any year and to the full extent. Therefore, in the instant case, as the Cenvat Credit was availed of in the year 2006-07, when the assessee had not yet registered under Rule 9 of the Central Excise Rules, the assessee did not utilize the Cenvat credit. It is only after registration, in the subsequent year, they have utilized the entire Cenvat credit which was standing to their credit - Decided in favour of assessee.

Summary

Issues:
1. Challenge to Tribunal's order granting Cenvat Credit benefit to assessee.
2. Interpretation of Rule 3(1) and Rule 4(2) of the Cenvat Credit Rules, 2004.
3. Utilization of Cenvat credit in the year of availment.
4. Justification of granting exemption to the assessee.

Analysis:
1. The High Court addressed the appeal by the Revenue challenging the Tribunal's order granting Cenvat Credit benefit to the assessee, who is a manufacturer of excisable goods falling under Chapter 84 of the Central Excise Tariff Act, 1985. The Tribunal allowed the appeal, setting aside the lower authorities' order, based on the interpretation of Rule 3(1) and Rule 4(2) of the Cenvat Credit Rules, 2004.

2. The Tribunal's decision was based on the interpretation that there is no bar for an SSI unit to take Cenvat credit on inputs or capital goods received during a specific period. Rule 4(2) allows an assessee to avail capital goods credit up to 50% in the year of receiving the goods and the balance in subsequent financial years. The Tribunal found that the assessee availed the credit in the following year, which was not inconsistent with the legal provisions, leading to the grant of relief to the assessee.

3. The Revenue contended that the assessee must utilize the Cenvat credit in the year of its availment as per Section 4(2) of the Rules. However, the Court noted that Rule 4(2)(b) allows utilization of unutilized credit in any subsequent year to the full extent. As the assessee registered after availing the credit, they were justified in utilizing the entire credit in the subsequent year, contrary to the Revenue's argument.

4. The substantial question of law considered by the Court was whether the Tribunal was justified in granting exemption to the assessee when they did not qualify for any exemption under Rule 4(2) due to registration issues. The Court found that the assessee's utilization of the credit in the subsequent year after registration was in accordance with the Rules, and the Tribunal's decision to grant the benefit was upheld. The appeal by the Revenue was dismissed, affirming the Tribunal's order in favor of the assessee.