2017 (12) TMI 1234 - HC - Central Excise

Whether the Tribunal was right in holding that the provisions of Rule 57AC (2)(b) are applicable to deny the credit of balance of the 50 percent of duty paid on the said capital goods in the next financial year 2001-02 when there is no such provision in Rule 57A (2)(C)? Held that - In this case, the Apex Court observed that Rule 57AC does not restrict grant of credit in a given financial year. Further, it was observed that whereas 50% of the credit can be taken in one financial year, the balance may be availed in subsequent years, subject to the condition that the capital goods are still in possession and use of manufacturer of the final products in the subsequent year - In the circumstances, the ultimate view taken by the Appellate Tribunal in the present case of confirming the demand of 50% credit availed by the appellant in the year 2001-02 cannot be faulted with, as admittedly, the capital goods were not used from December 2000 onwards. Appeal dismissed - decided against appellant.

Summary

Issues:
- Interpretation of Rule 57AC of the Central Excise Rules, 1944 regarding the availability of CENVAT credit for capital goods.
- Applicability of Rule 57AC in denying credit for capital goods not used in subsequent financial years.
- Comparison with legal precedent Commissioner of Central Excise vs. Saurashtra Chemicals Ltd. 2007 (212) E.L.T. 7 (S.C.) for determining the eligibility of CENVAT credit.

Analysis:
1. The case involved a dispute over the appellant-assessee's entitlement to CENVAT credit for capital goods under Rule 57AC of the Central Excise Rules, 1944. The appellant had taken credit of 50% of the duty paid on the capital goods, but a show cause notice was issued alleging illegal availing of the balance 50% credit in the financial year 2001-02 due to non-use of the goods from October 2000 onwards.

2. The Appellate Tribunal confirmed the demand for the balance 50% credit availed by the appellant in the subsequent financial year. The appellant argued that the Tribunal's reasoning was erroneous based on the judgment of the Apex Court in Commissioner of Central Excise vs. Saurashtra Chemicals Ltd., which allowed credit up to 50% for capital goods not used in the same financial year.

3. Rule 57AC stipulates conditions for allowing CENVAT credit, including the limitation of 50% credit in the same financial year for capital goods. The Apex Court's decision in Saurashtra Chemicals Ltd. case clarified that credit can be taken for capital goods received but not installed before 1st April, 2000, subject to conditions, including the possession and use of goods in subsequent years.

4. The Apex Court's interpretation emphasized that while 50% credit can be claimed in one financial year, the balance can be availed in subsequent years if the capital goods remain in possession and use of the manufacturer. The Appellate Tribunal's decision to confirm the demand for 50% credit availed in the subsequent year was upheld due to the non-use of capital goods from December 2000 onwards.

5. Ultimately, the High Court dismissed the appeal, finding no merit in challenging the Appellate Tribunal's decision based on the clear provisions of Rule 57AC and the legal precedent set by the Apex Court. The appellant's non-compliance with the conditions for availing CENVAT credit for capital goods not used in subsequent financial years led to the confirmation of the demand.

This detailed analysis of the judgment highlights the key legal issues, the application of relevant rules, and the comparison with a significant legal precedent, providing a comprehensive understanding of the case.