2016 (8) TMI 1020 - AT - Central Excise

Eligibility - credit on capital goods and area based exemption notification no. 50/2003-CE dated 10.06.2003 - manufacture of sugar and molasses - undertaken substantial expansion of their existing capacity in 2005 - availed Cenvat Credit from 21.04.2006 to 06.07.2005 - on 15.11.2005 onwards started availing exemption under notification 50/2003-CE - Held that - no legal basis found in such assertion of Revenue that when the respondent is aware that they are going to claim full exemption of their final product based on notification no. 49/03 and 50/03, they should not have availed credit. It was contended by the Revenue that the respondent postponed the availment of area based exemption only to avail credit on capital goods. but when the credit eligibility on capital goods are determined on applicable legal provisions, other presumptions or alleged motive of the respondent are of no consequence. Therefore, by referring to the decision of Hon ble Supreme Court in the case of CCE Vs. Dai Ichi Karkara Ltd. 1999 (8) TMI 920 - SUPREME COURT OF INDIA , Tribunal s decision in the case of Hindustan Coca Cola Beverages (P) Ltd. Vs. CCE 2005 (7) TMI 387 - CESTAT, MUMBAI and Kerala High Court s order in the case of CCE Vs. Premier Tyres 2001 (2) TMI 137 - HIGH COURT OF KERALA AT ERNAKULAM , and as there is no valid legal ground in the present appeal for denying the credit on capital goods, no merit found in appeal filed by Revenue. - Decided against the Revenue

Summary

Issues:
Appeal against Commissioner's order allowing exemption on capital goods availed before claiming full exemption under notification no. 50/2003-CE.

Analysis:

1. Facts of the Case:
The case involved a respondent engaged in sugar and molasses manufacturing, who undertook capacity expansion in 2005 and availed Cenvat Credit for capital goods before claiming exemption under notification no. 50/2003-CE. The Revenue initiated proceedings to demand recovery of the availed credit, leading to an appeal against the Commissioner's order setting aside the original demand.

2. Arguments by Revenue:
The Revenue contended that the respondent intentionally delayed claiming exemption to avail credit on capital goods, justifying the denial of credit. They argued that as the final products were to be fully exempt under the notification, availing credit on capital goods was unjustified.

3. Legal Analysis:
The Tribunal examined the legality of denying credit on capital goods in such circumstances. They noted that the receipt of capital goods and their eligibility for credit were undisputed. Referring to legal precedents including Supreme Court and Tribunal decisions, the Tribunal emphasized that if an assessee avails Cenvat Credit on capital goods while manufacturing dutiable goods, they are not required to reverse the credit if the goods become exempt later. The Tribunal found no legal basis to deny credit based on the timing of claiming exemption.

4. Decision and Rationale:
After considering the cited decisions and finding no valid legal ground to deny credit on capital goods, the Tribunal dismissed the Revenue's appeal. They highlighted that the legal position, as established in previous cases, supported allowing credit on capital goods even if full exemption was claimed later. The Tribunal emphasized that the eligibility for credit on capital goods was determined by legal provisions, rendering other presumptions or motives irrelevant.

5. Conclusion:
The Tribunal's decision upheld the Commissioner's order, emphasizing the legal right of the respondent to avail credit on capital goods despite delaying the claim for full exemption under the notification. The judgment clarified the legal position on availing Cenvat Credit in scenarios where goods become exempt later, providing a clear precedent for similar cases in the future.