2014 (2) TMI 1099 - HC - Central Excise

Cenvat Credit - Use of capital goods to manufacture exempted goods - Demand u/s 11A - Extended period of limitation - Held that - Machine which was installed in the factory was used both for manufacture of exempted goods as well as dutiable goods. Dutiable goods were manufactured since October, 2006 which fact has been noted in Paragraph No. 8 of the judgment of the Tribunal. The Tribunal had denied the benefit on the pretext that the certificate of the manufacturer relied upon by the appellant also confirms that the plant is usable for manufacture of aerated waters only after modification - The manufacture had certified that machine is designed to handle carbonated/aerated soft drinks by software changes and minor adjustments. The certificate never said that the object can be achieved only after modification. The certificate did not use the word modification which has crept in the order of the Tribunal. More so, before us now the appellant has filed certificate dated 25.09.2009 which indicates that no modification in the machine can be done in India since it is manufactured at Germany and imported in India - Thus, the appeal is allowed by setting aside the judgment of the Tribunal dated 01.05.2008 and the matter is remitted back to the Tribunal to decide the appeal afresh in accordance with law taking into consideration the certificate dated 25.09.2009 - Decided in favour of assessee

Summary

Issues:
- Appeal filed against judgment and order passed by the Customs, Excise & Service Tax Appellate Tribunal
- Dispute regarding CENVAT credit on duty paid for capital goods
- Machine capable of manufacturing both exempted and dutiable goods
- Show cause notice issued for recovery under CENVAT Credit Rules
- Tribunal affirmed Commissioner's order, leading to the current appeal
- Interpretation of Rule 6 sub-rule (4) of CENVAT Credit Rules, 2004
- Consideration of manufacturer's certificate in determining machine capabilities

Analysis:
The case involves an appeal under Section 35-G of the Central Excise Act, 1944 against a judgment by the Customs, Excise & Service Tax Appellate Tribunal. The dispute revolves around the appellant receiving capital goods and taking CENVAT credit of duty paid on these goods. The key issue is the machine in question, capable of manufacturing both exempted and dutiable goods. The appellant used the machine for exempted goods initially but later also for dutiable goods from October 2006. A demand-cum-show cause notice was issued, alleging suppression of facts and claiming recovery under the CENVAT Credit Rules. The Commissioner confirmed the demand, leading to the appeal before the Tribunal, which upheld the order.

In the appeal, the appellant argued that the machine's capability for manufacturing both types of goods justified the CENVAT credit availed. They emphasized that the machine did not require modification for this dual functionality, supported by manufacturer certificates. The Tribunal's denial of benefits based on a perceived need for modification was challenged, with the appellant presenting a new certificate indicating no possibility of modification in India due to the machine's origin in Germany. The High Court noted the relevant Rule 6 sub-rule (4) of the CENVAT Credit Rules, 2004, which restricts credit on capital goods exclusively used for exempted goods.

The High Court found that the machine was indeed used for both exempted and dutiable goods, as confirmed by the manufacturer's certificates. The Tribunal's misinterpretation of the certificate regarding modifications led to the setting aside of its judgment. The Court remitted the matter back to the Tribunal for reconsideration, taking into account the new certificate provided. The Court also directed that pending recovery be halted until the appeal is resolved, emphasizing expeditious handling of the case before the Tribunal.

In conclusion, the High Court allowed the appeal, emphasizing the importance of accurate interpretation of the machine's capabilities and the manufacturer's certificates in determining CENVAT credit eligibility. The case highlights the significance of adherence to statutory provisions and proper consideration of evidence in excise duty matters.