2011 (8) TMI 315 - AT - Central Excise

Cenvat credit on capital goods - Assessee availed cenvat credit of Rs. 1, 12, 754/- on capital goods i.e. dryer which have been used exclusively for manufacture of exempted goods - Revenue s contention was that Para 4 of Rule 6 of Cenvat Credit Rules 2004 does not allow the credit of duty paid on that capital goods which are used in the manufacture of exempted goods - The availability of credit is dependent on factors/conditions like duty paid nature of the capital goods receipt of the same in the factory and use of the capital goods for manufacture of dutiable goods. - the credit eligible is not based on capability but based on use in the manufacture of dutiable goods. These conditions are required to be fulfilled at the time of receipt of the capital goods which is the relevant time. Subsequent developments cannot influence the eligibility - that the appellants are not eligible for availing modvat credit on the goods which are distinctly exempted - Decided against the assessee.

Summary

Issues:
Cenvat credit on capital goods used for manufacturing exempted goods.

Analysis:
The case involved M/s. Valson Industries Limited, Vapi, availing cenvat credit on capital goods used exclusively for manufacturing exempted goods, specifically Dyed Yarn. The Revenue contended that Rule 6 of Cenvat Credit Rules, 2004 does not permit credit on capital goods used for exempted goods. The original adjudicating authority rejected the refund claim, which was upheld by the Commissioner (Appeal).

The sub-Rule 4 of Rule 6 explicitly states that no cenvat credit shall be allowed on capital goods exclusively used in manufacturing exempted goods. The Tribunal emphasized that the rule's wording does not allow for any alternative interpretation. The appellant argued that the dryer was used for both exempted and dutiable Yarn, but the Commissioner (Appeal) found discrepancies in the timeline of events related to the reversal of credit and subsequent refund claim.

The Commissioner (Appeal) noted that the appellant's claim of using the machines for both types of goods lacked supporting documentation like an affidavit or technical opinion. Citing the case of Brindavan Beverages (P) Limited vs. CCE, the Tribunal highlighted that credit eligibility is based on the use of capital goods for manufacturing dutiable goods at the time of receipt, and subsequent developments cannot impact eligibility. The High Court admitted the department's appeal against this decision.

Ultimately, the Tribunal concluded that the appellants were not eligible for availing modvat credit on goods distinctly exempted, finding no fault in the original or appellate orders. As a result, the appeal was rejected, and the judgment was pronounced on 17.08.2011.