2015 (10) TMI 1684 - AT - Central Excise

Refund claim - Reversal of CENVAT Credit - Exemption from duty in terms of Notification No.6/2002 - Capital goods - Held that - In terms of the provisions of Rule 6(4) of CENVAT Credit Rules, 2002, no CENVAT credit is available on capital goods which are used exclusively in the manufacture of exempted goods. The issue of availability of credit is to be decided at the time of receipt of the capital goods. As such the issue to be decided is as to whether the capital goods, which were received by the appellant, when their final product was exempt, would be eligible for the purpose of CENVAT credit or not. - appellant had not even switched to manufacture of some dutiable products. It is only by operation of law that the exempt products become subsequently dutiable. Inasmuch as the availability of credit of duty paid on the capital goods is required to be judged at the time of receipt of the capital goods, subsequent becoming of goods as dutiable on account of withdrawal of exemption would not advance the appellant s case of claim after such change in law. The appellant having used the capital goods for a period of more than four years for manufacture of exempted final products are admittedly not entitled to the CENVAT Credit of duty paid on such capital goods. As such, I find no reasons to interfere in the impugned orders of the lower authorities. - Decided against assessee.

Summary

Issues:
1. Eligibility of CENVAT credit on capital goods used in the manufacture of exempted goods.
2. Interpretation of Rule 6(4) of CENVAT Credit Rules, 2001.
3. Impact of subsequent change in product classification on CENVAT credit availability.
4. Comparison with relevant case law on the admissibility of credit.

Analysis:

Issue 1:
The appellants manufactured ceiling tiles falling under Chapter Heading No. 6807.90, with exemption from duty if containing less than 25% fly ash content. They received capital goods during 2001-2004 and availed credit. However, an audit revealed they only produced exempted tiles, leading to voluntary reversal of CENVAT credit. Subsequently, they sought to reclaim the credit post-exemption withdrawal in 2006.

Issue 2:
The original adjudicating authority rejected the claim, citing Rule 6(4) of CENVAT Credit Rules, 2001, barring credit for goods exclusively used in exempted product manufacture. The Commissioner (A) upheld this decision, emphasizing the ineligibility due to the historical use of capital goods in exempted product manufacturing.

Issue 3:
The Tribunal analyzed Rule 6(4) applicability, stating credit eligibility is determined at capital goods receipt, not post-product reclassification. The case law precedent highlighted that initial use for exempted products precludes credit availability upon product reclassification, as seen in the Brindavan Beverages case.

Issue 4:
The Tribunal differentiated the present case from Brindavan Beverages, noting the absence of a switch to dutiable products by the appellant. The judgment emphasized that credit admissibility hinges on the goods' status at capital goods receipt, regardless of subsequent changes in product classification. As the appellants used the capital goods solely for exempted products for over four years, they were deemed ineligible for CENVAT credit post-exemption withdrawal.

In conclusion, the appeal was dismissed, affirming the lower authorities' decisions on the inadmissibility of CENVAT credit due to the historical use of capital goods in exempted product manufacturing, as per Rule 6(4) of CENVAT Credit Rules, 2001.