2014 (8) TMI 14 - AT - Central Excise

Cenvat Credit on inputs services and capital goods received before registration - capital goods and input services which were consumed for setting up of the factory - Held that - It is a common sense that unless a factory is setup, trial runs are taken, an assessee will be unable to manufacture excisable products. The entire exercise of the assessee for setting up of factory is for manufacturing excisable goods which can be done so only when he erects, installs and commissions the capital goods with the help of various agencies. In the case in hand, we find that there is no dispute that appellant has received the capital goods and the input services, utilized them for setting up the manufacturing facilities. To deny credit of the central excise duty paid and service tax paid, would be travesty of justice, more so when the assessee herein is discharging appropriate excisable duty on the finished goods cleared after taking the registration certificate. Decision in the case of mPortal India Wireless Solutions Pvt. Ltd. Vs. CCE, Bangalore (2011 (9) TMI 450 - KARNATAKA HIGH COURT) followed - Decided in favor of assessee.

Summary

Issues involved:
Whether the appellant is eligible to avail Cenvat Credit of duty paid on capital goods and service tax on input services received before obtaining central excise registration.

Analysis:

Issue 1: Eligibility of Cenvat Credit
The appellant availed Cenvat Credit of central excise duty on capital goods and service tax on input services received before central excise registration. Revenue authorities contended in show cause notices that the appellant was ineligible for such credit. The adjudicating authority confirmed demands, citing Rule 9 of Central Excise Rules, 2002. The appellant argued that credit cannot be denied for goods consumed in setting up the factory, relying on a Karnataka High Court judgment. The Departmental Representative argued that credit eligibility depends on when the goods were received. The Tribunal found the appellant eligible for credit as the goods were used for manufacturing excisable products after setup. The adjudicating authority's denial based on registration was deemed incorrect, as it hindered the reduction of tax cascading effect.

Issue 2: Legal Precedents
The Tribunal referenced a Karnataka High Court judgment involving Cenvat credit denial based on lack of registration, emphasizing that registration is not a prerequisite for credit eligibility. The judgment highlighted that denial of credit based on registration absence is not supported by law. The Tribunal found the Karnataka High Court judgment applicable to the present case, reinforcing the appellant's entitlement to credit.

Issue 3: Comparison with Previous Case
The Tribunal distinguished the present case from a previous case cited by the Departmental Representative, where goods were utilized for non-taxable services until a later taxable period. This distinction rendered the precedent inapplicable to the current scenario.

Conclusion:
The Tribunal concluded that the impugned orders were unsustainable and set them aside, allowing the appeals. The denial of Cenvat Credit to the appellant on technical registration grounds was deemed unjust, considering the goods were used for manufacturing excisable products post-setup. The judgment emphasized the importance of reducing tax cascading effects and upheld the appellant's right to avail Cenvat Credit for the duty paid on capital goods and service tax on input services consumed in setting up the manufacturing facilities.