2013 (9) TMI 419 - HC - Central Excise

CENVAT credit on Capital Goods - balance 50% of credit availed during subsequent years before the machinery put to use - What was the true meaning & scope of the expression in the possession and use of the manufacturer of final products in such subsequent years in Rule 4(2)(b) of the Cenvat Rules - When Rule 4(2)(b) allowed credit provided the capital goods in question were in possession and use of the manufacturer in such subsequent year , whether the Tribunal erred in law in imposing a new condition that in such subsequent year the credit could not be taken prior to the date of installation of the capital goods. Held that - The matter boils down to a narrow compass i.e. the interpretation of the phrase, are in the possession and use of the manufacturer of final products in such subsequent years occurring in the aforesaid Rule 4(2)(b) of the CENVAT Credit Rules, 2002 - In our opinion, the Mumbai Bench of the Tribunal was not right in reading the said phrase as, are in the possession for use - The law in respect of interpretation of taxing statutes was well defined and well settled - Commissioner of Sales Tax, U.P. v. Modi Sugar Mills Ltd. 1960 (10) TMI 65 - SUPREME COURT OF INDIA in interpreting the taxing statutes, held, In interpreting a taxing statue, equitable considerations are entirely out of place. Nor can taxing statutes be interpreted on any presumptions or assumptions. The court must look squarely at the words of the statute and interpret them. It must interpret a taxing statute in the light of what is clearly expressed; it cannot imply anything which is not expressed; it cannot import provisions in the statutes so as to supply any assumed deficiency . The phrase, in possession and use of the manufacturer of final products was clear and unambiguous - The phrase calls for one and only one interpretation and does not call for any external aid to cull the meaning of the said phrase - the phrase provided for two conditions, (1) the manufacturer should be in possession of the capital goods in the year in which it claims remaining 50% of the CENVAT credit; and (2) such capital goods shall be in use for manufacture of final products. Unless, the manufacturer satisfies both the aforesaid conditions, it cannot take CENVAT credit of remaining 50% of the duty paid by it. - Decided against the accessee.

Summary

Issues:
- Interpretation of Rule 4(2)(b) of the CENVAT Credit Rules regarding availing of CENVAT credit on capital goods.
- Whether possession and use of capital goods are required before availing of the remaining 50% of CENVAT credit.
- Comparison of Rule 4(2)(b) with the erstwhile provisions of Rule 57Q of the Central Excise Rules, 1944.
- Contradictory interpretations by different Tribunals and High Courts regarding the possession and use of capital goods for availing CENVAT credit.

Analysis:
The judgment pertains to an appeal under Section 35-G of the Central Excise Act, 1944, where the appellant, a manufacturer, contested the denial of CENVAT credit on capital goods imported in the financial year 2000-2001. The key issue revolved around the interpretation of Rule 4(2)(b) of the CENVAT Credit Rules, particularly concerning the possession and use of capital goods for availing the remaining 50% of the CENVAT credit. The appellant argued that the capital goods were in possession and use in subsequent years, justifying the credit availed. The appellant questioned the Tribunal's imposition of a new condition that credit could not be taken before the installation of capital goods.

The appellant contended that Rule 4(2)(b) did not mandate prior installation or use of capital goods before availing credit, citing the change in language and scheme from the erstwhile Rule 57Q. The appellant relied on the Mumbai Tribunal's decision in Ispat Industries Ltd., which considered capital goods in possession for installation as being in use for manufacture. However, conflicting interpretations by different Tribunals and High Courts were noted, adding complexity to the issue.

The Court analyzed the phrase "in possession and use of the manufacturer of final products" in Rule 4(2)(b) and emphasized the clear and unambiguous requirement for both possession and use for availing the remaining CENVAT credit. The Court rejected the appellant's argument that the capital goods were put to use in the same financial year, emphasizing the need for actual use before claiming credit. The Court cited the Commissioner's decision to deny credit due to incomplete project status and non-commencement of commercial production.

The Court dismissed the appeal, stating it lacked any question of law, let alone a substantial one. The judgment highlighted the importance of strict interpretation of taxing statutes, emphasizing that equitable considerations are irrelevant. The Court also rejected the appellant's reliance on departmental Circulars, noting their lack of support for the appellant's interpretation. The judgment underscored the necessity of actual use of capital goods before availing CENVAT credit, aligning with the Commissioner's decision and the clear language of Rule 4(2)(b).

In conclusion, the judgment clarifies the stringent requirements for availing CENVAT credit on capital goods, emphasizing the need for both possession and actual use in the manufacture of final products. The conflicting interpretations by different Tribunals and High Courts underscore the complexity in applying tax laws and the significance of clear statutory language in determining tax liabilities.