2017 (7) TMI 1121 - AT - Central Excise

CENVAT credit - capital goods received prior to the date of registration - Held that - it is evident from a plain reading of Rule 6(4) that it carves out an exception with respect to the factories or the assessees whose product is otherwise dutiable but are enjoying exemption based upon value or quantity of clearance in a Financial Year - Learned Commissioner have erred in holding that the appellant is not entitled to the Cenvat credit as they were not manufacturing any excisable goods, prior to the date of registration - appeal allowed - decided in favor of appellant.

Summary

Issues:
Entitlement to Cenvat credit of capital goods received prior to registration.

Analysis:
The appeal questioned whether the appellant-manufacturer could claim Cenvat credit for capital goods received before their registration, while producing excisable goods at nil duty under SSI Exemption. The appellant, engaged in manufacturing plastic furniture, obtained registration under Central Excise from 28th December, 2005. However, they availed Cenvat credit on capital goods before this registration date, leading to scrutiny. The Revenue contended that the appellant wrongly availed the credit as per CCR, 2004, stating that Cenvat credit is available post-registration for duty discharge purposes.

The Commissioner (appeals) ruled against the appellant, emphasizing that the condition of receiving goods in the factory, as per Rule 4(2)(a) CCR, 2004, was not met since the appellant wasn't manufacturing excisable goods before 20/12/2005. The definition of 'factory' under Section 2 of the Central Excise Act was cited to support this view. However, the Tribunal analyzed Rule 6(4) of Cenvat Credit Rules, which states that no credit is allowed on capital goods used exclusively for exempted goods or services, except if the final products are exempt based on clearances in a Financial Year.

The Tribunal noted that Rule 6(4) provides an exception for dutiable products enjoying exemptions based on clearances. Despite the appellant's products being dutiable under Tariff Chapter No.94, they were under SSI exemption when receiving the capital goods in the same Financial Year. Consequently, the Tribunal found the Commissioner's decision erroneous, allowing the appeal, overturning the disallowance of Cenvat credit on capital goods, and setting aside the penalty. The Tribunal clarified that registration is not a prerequisite for claiming Cenvat credit under CCR, 2004. The appellant was granted consequential benefits as per the law.

In conclusion, the Tribunal's decision favored the appellant, affirming their entitlement to Cenvat credit for capital goods received before registration, based on the specific exemption scenario and the provisions of Cenvat Credit Rules, while emphasizing the distinction between dutiable products under exemption and the registration requirement for credit claims.