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2012 (2) TMI 11 - AT - Central ExciseEligibility to avail the credit of balance 50% of the amount of duty paid on the capital goods in the subsequent financial year, without installing the same and putting it into use reference made to larger bench A.Y. 2003-04 Held that - In view of decision in case of CCE vs. Ispat Industries Ltd (2006 -TMI - 489 - CESTAT, MUMBAI) it is held that the condition imposed under the relevant Cenvat Credit Rules, for taking credit of balance of 50% of amount of duty on capital goods in subsequent financial years, in case the capital goods are lying in the factory for installation and the process of erection was being carried out has to be considered as the capital goods were in possession and use for manufacture. - Decided in favor of assessee.
Issues Involved:
Interpretation of Rule 4(2)(b) of the CENVAT Credit Rules regarding availing credit of balance 50% of duty paid on capital goods in subsequent financial years without installation and use. Analysis: 1. Interpretation of Rule 4(2)(b) of CENVAT Credit Rules: The main issue in this case revolves around interpreting Rule 4(2)(b) of the CENVAT Credit Rules, which allows for the balance of CENVAT credit to be taken in any subsequent financial year if the capital goods are in the possession and use of the manufacturer for the manufacture of final products. The question of law referred to the Larger Bench pertains to the eligibility of an assessee to avail of the credit without installing and using the capital goods. 2. Significance of 'possession and use of the manufacturer of final products': The crux of the matter lies in determining the meaning of 'possession' and 'use of the manufacturer of final products' as outlined in the Rule. The interpretation of these terms is crucial in deciding whether the conditions for availing the balance 50% credit in subsequent years have been met by the assessee. 3. Precedents and Tribunal Decisions: The judgment cites two significant Tribunal decisions to provide context to the interpretation of the Rule. In the case of Parasrampuria Synthetics, the Tribunal denied the balance credit as the capital goods were not installed or used by the manufacturer. Conversely, in Ispat Industries Ltd. vs. CCE, the Tribunal allowed the credit even when the capital goods were at the stage of erection. 4. Decision of the Hon'ble Bombay High Court: The Hon'ble Bombay High Court, in a related appeal, upheld the Tribunal's decision that the expression 'possession and use of the manufacturer of final products' must be read together. The Court emphasized that the goods should be available for use in the manufacture of final products, and in the specific case, where the capital goods were in the factory for installation and erection was ongoing, the conditions for availing the credit were deemed to be fulfilled. 5. Conclusion and Order: Based on the interpretation provided by the Hon'ble Bombay High Court, the question referred to the Larger Bench was answered affirmatively. The condition for taking credit of the balance 50% of duty on capital goods in subsequent financial years is considered met if the capital goods are in the factory for installation and the process of erection is underway. The matter was directed to be placed before the Division Bench for further proceedings on the appeal. In summary, the judgment delves into the nuanced interpretation of the CENVAT Credit Rules, emphasizing the importance of possession and use of capital goods for availing the balance credit in subsequent financial years, as elucidated through legal precedents and the decision of the Hon'ble Bombay High Court.
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