2010 (4) TMI 787 - AT - Service Tax

Cenvat credit on capital goods - whether the appellant is eligible to avail cenvat credit on the capital goods, which were purchased by him and the Cenvat credit availed, on transfer to their depots situated in various States - The provisions of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 allows an assessee to avail the credit on Capital Goods even if they are sent to job worker for any other purpose - The provisions of Rule 4(5)(a) have not been examined by the lower authorities in this case - If the provisions of Rule 4(5)(a) are examined, then the relief eligible to the appellant under the provisions of Rule 4(5)(a) cannot be denied - Therefore, set aside the impugned order and remand the matter back to the Adjudicating Authority to re-consider the issue afresh.

Summary

Issues:
- Eligibility of the appellant to avail Cenvat credit on capital goods transferred to branch offices.
- Interpretation of Rule 4(5)(a) of the Cenvat Credit Rules, 2004.

Analysis:
1. Issue 1 - Eligibility of Cenvat Credit on Capital Goods:
The appellant, a manufacturer of Paints and Varnishes, Pigments, and Putty, availed Cenvat credit on capital goods, including "BT-Tint master Machines" and "Manual Dispensers," amounting to Rs. 2,35,899. The department denied CENVAT credit on capital goods transferred to branch offices, leading to a demand notice. The lower authorities upheld the denial, stating the machines were not used in the factory of the manufacturer of final products. However, the appellant argued that since they still owned and possessed the machines, using them at depots for color matching was in furtherance of their manufactured product. The appellate tribunal noted that Rule 4(5)(a) of the Cenvat Credit Rules, 2004 allows credit on capital goods sent to job workers for other purposes. As the lower authorities did not consider this provision, the tribunal remanded the matter for re-consideration, emphasizing that the machines were used at the appellant's depots for customer color requirements.

2. Issue 2 - Interpretation of Rule 4(5)(a) of Cenvat Credit Rules, 2004:
The tribunal highlighted the importance of Rule 4(5)(a) in allowing an assessee to avail credit on capital goods even when sent to job workers for different purposes. The lower authorities failed to examine this provision, leading to an incorrect denial of credit to the appellant. By setting aside the impugned order and remanding the case, the tribunal directed the Adjudicating Authority to re-evaluate the issue considering Rule 4(5)(a). This decision underscores the need for a comprehensive analysis of relevant rules to determine the eligibility of Cenvat credit in cases involving the transfer of capital goods to different locations for operational purposes.