2011 (3) TMI 758 - AT - Central Excise

Cenvat Credit on Capital Goods - Lapse or not - Surrender of central excise registration - Notification No. 47/2000 dated 1st September 2000 - Rule 15AC(2)(a) (sic) provides that the Cenvat credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent of the duty paid on such capital goods in the same financial year - Since the credit in question was earned in relation to the duty paid on the capital goods and there being no provision in the excise law and rules made thereunder for lapsing of such credit merely on the ground of surrender of registration certificate or on the ground of availing the exemption benefit under a notification granting such exemption based on value or quantity of clearances - Decided in favour of the assessee

Summary

Issues:
1. Denial of Cenvat credit on capital goods.
2. Surrender of registration certificate and subsequent re-registration.
3. Interpretation of Rule 57AG(2) in relation to credit earned on capital goods.
4. Applicability of Rule 57AD(3) on credit availed for capital goods used in exempted goods.

Analysis:
1. The appellants, engaged in the manufacture of cotton yarn, availed Cenvat credit on capital goods amounting to Rs. 20,84,742. The dispute arose when the Additional Commissioner disallowed a portion of the credit and imposed penalties. The appellants argued that the denial of credit was erroneous as the provisions applied to inputs, not capital goods. They relied on specific rules and a Tribunal decision to support their claim.

2. The surrender of the registration certificate by the appellants was due to the SSI exemption limit being raised. Upon re-registration, they sought to utilize the balance credit earned on capital goods. The contention was whether the credit lapsed upon surrendering the registration. The DR argued against allowing the credit based on previous Tribunal decisions, claiming the surrender invalidated the credit.

3. Rule 57AG(2) was central to the dispute, but it pertained to credit on inputs, not capital goods. The Tribunal noted that the rule did not cover credit earned from duty paid on capital goods. The DR's argument that the logic applied to capital goods credit was rejected. The Tribunal analyzed relevant rules governing the utilization of capital goods credit in subsequent financial years.

4. Rule 57AD(3) was discussed concerning the disallowance of credit on capital goods used exclusively in manufacturing exempted goods. However, this exclusion did not apply when exemption was based on the value or quantity of clearances. The Tribunal found no provision justifying the lapsing of credit earned on capital goods or denying its utilization upon re-registration.

5. Citing precedents, including J.R. Herbal Care India Ltd. v. CCE, Noida, the Tribunal concluded that surrendering the registration did not bar the appellants from availing the credit. The impugned order was set aside, affirming the appellants' entitlement to the credit and allowing the appeal with consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented by both parties, relevant legal provisions, and the Tribunal's decision in favor of the appellants.