2016 (11) TMI 690 - AT - Central Excise

CENVAT credit on capital goods and clearance without payment of duty - N/N. 30/2004-CE dated 9.7.2004 - Held that - similar issue decided in the case Winsome Yarns Ltd. 2015 (9) TMI 459 - CESTAT NEW DELHI where it was held that Since during the period of dispute the appellant was clearing the goods by availing full duty exemption as well as on payment of duty, the capital goods cannot be treated as having been used exclusively in the manufacture of exempted goods and Cenvat credit in respect of the same cannot be denied - the appellant has correctly taken the credit on capital goods - appeal allowed.

Summary

Issues:
- Availment of credit on capital goods under different notifications
- Denial of credit and initiation of proceedings
- Interpretation of exemption notifications
- Applicability of previous tribunal decisions

Analysis:

The case involves an appeal against an order where the appellant, a yarn manufacturer, availed credit on capital goods under different notifications. The appellant operated under Notification No. 29/2004-CE and Notification No. 30/2004-CE, which provided concessional rates and full duty exemption, respectively. The appellant cleared goods without payment of duty under Notification No. 30/2004-CE, leading to allegations of improper credit availing. Subsequently, proceedings were initiated, and the credit was denied, prompting the appeal.

Upon hearing the parties and considering submissions, the Tribunal referred to previous cases for guidance. In the case of Oswal Woollen Mills Ltd., it was noted that if the final product is not fully exempted, credit cannot be denied. Similarly, in Winsome Yarns Ltd., it was established that the appellant, by not availing input duty credit, had the option to choose between the two notifications for duty payment. The Tribunal emphasized that under Notification No. 29/2004-CE, the appellant could pay 4% duty even without availing input credit, contrary to the Department's contention.

The Tribunal concluded that the appellant rightfully availed credit on capital goods as per the provisions of Notification No. 29/2004-CE. Citing the precedent set by Winsome Yarns Ltd., the impugned orders were deemed meritless, and the appeals were allowed with consequential relief, if any. The decision highlighted the appellant's entitlement to choose the most beneficial exemption notification when not availing input duty credit, rejecting the Department's insistence on a specific exemption.