2017 (7) TMI 287 - AT - Central Excise

CENVAT credit - denial of credit on the ground that at the time of procurement of the capital goods, the assessee was availing the exemption provided under Notification dated 10.06.2003 - Held that - Sub Rule (4) of Rule 6 of the CCR mandates that no cenvat credit shall be allowed on capital goods, which are used exclusively in the manufacture of the exempted goods - In the present case, it is an admitted fact on record that during the time of procurement of the capital goods and their installation within the factory, the appellant was availing the exemption provided under Notification No. 50/2003-CE dated 10.06.2003. Since at the time of installation, the final products were exempted from payment of duty and no other goods were manufactured, which attracted payment of duty, as per provisions of sub rule (4) of Rule 6 ibid, CENVAT benefit is not permissible to the appellant. CENVAT credit - godown rent - denial on the ground that the said service is not confirming the definition of input service inasmuch as, said service was utilized by the appellant beyond the place of removal - Held that - Since the godonwn was not a part of the registered factory premises, the same cannot be considered as place of removal for the purpose of consideration for CENVAT credit under Rule 2 (l) ibid - credit not admissible. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Availment of cenvat credit on capital goods under area-based exemption.
2. Denial of cenvat credit on service tax paid on godown rent.

Analysis:

Availment of Cenvat Credit on Capital Goods:
The appellant availed area-based exemption under Notification No.50/2003-CE but started paying Central Excise duty later. The Department denied cenvat credit on capital goods procured during the exemption period. The appellant argued that the capital goods were used for manufacturing excisable goods after duty payment commenced. The appellant cited judgments to support their claim. The Department relied on the rule that disallows cenvat credit on capital goods used exclusively for exempted goods. The Tribunal referred to the Spenta International Ltd. case, stating cenvat eligibility is tied to the dutiability of the final product at the time of receipt or credit utilization. As the final products were exempt during capital goods installation, cenvat benefit was rightly denied by the Department.

Denial of Cenvat Credit on Service Tax Paid on Godown Rent:
The appellant sought cenvat credit on service tax paid for godown rent, arguing the godown was part of the factory premises where excisable goods were stored before sale. The Department contended that the godown, not being part of the registered factory premises, did not qualify as a "place of removal" for cenvat credit purposes. The Tribunal upheld the Department's decision, stating that the godown's location did not meet the criteria for considering it a "place of removal" under the relevant rule.

In conclusion, the Tribunal dismissed the appeal, affirming the Department's denial of cenvat credit on both capital goods and service tax paid on godown rent. The judgment emphasized the importance of dutiability of final products and the specific criteria for availing cenvat credit under the relevant rules.