2018 (8) TMI 399 - AT - Central Excise

Whether cenvat credit on capital goods is allowable or eligible (a) only after the production from those capital goods commences or, (b) on the day the said goods are installed in the factory premises, or, (c ) on the day the goods are received in the factory premises for intended production of dutiable final products? Held that - CENVAT credit has to be determined on capital goods on the date of receipt i.e. as and when, goods are received in the factory of production alongwith evidence of duty paying documents - It also stands clarified by Board Circular vide Circular F.No.B-4/7/2000-TRU, dated 03.04.2000 laying down that credit can be taken as and when capital goods are received in the factory but not yet installed. Penalty - Sub-Rule (1) of Rule 15 of the Cenvat Credit Rules - Held that - The sub-rule of Rule 15 has not been indicated in the Show Cause Notice. From the four Sub-Rule in Rule 15 of the Cenvat Credit Rules, no Sub-Rule have been specifically mentioned in the Show Cause Notice - the demand of penalty is not maintainable under provisions of Rule 15 which is a general Rule. Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Eligibility of cenvat credit on capital goods.
2. Imposition of penalty under Rule 15 of Cenvat Credit Rules, 2004.

Eligibility of Cenvat Credit on Capital Goods:
The case involved the question of whether cenvat credit on capital goods is allowable only after production commences, on the day the goods are installed in the factory premises, or on the day the goods are received in the factory premises for intended production of dutiable final products. The Tribunal emphasized that cenvat credit must be determined on capital goods on the date of receipt in the factory along with evidence of duty paying documents. Referring to a CBEC Circular, it was clarified that installation of capital goods is not a prerequisite for taking cenvat credit. The Tribunal cited a precedent where denial of credit due to capital goods not being put to use at the time of availing credit was not sustainable. The Tribunal highlighted that the word "use" in the sub-rule does not necessitate actual use of the goods, and credit can be taken upon receipt in the factory premises, even if not yet installed.

Imposition of Penalty under Rule 15 of Cenvat Credit Rules, 2004:
Regarding the imposition of penalty under Rule 15 of the Cenvat Credit Rules, the Revenue appealed for penalty under Sub-Rule (1) of Rule 15, which stipulates penalties for wrongful utilization of cenvat credit. However, the Show Cause Notice did not specify the sub-rule of Rule 15 under which the penalty was being imposed. The Tribunal noted that the demand of penalty was not maintainable under Rule 15 without specifying the sub-rule, citing a Supreme Court decision. After analyzing case laws, it was concluded that cenvat credit on capital goods can be availed upon receipt in the manufacturer's factory. Consequently, the appeal filed by the Revenue for penalty imposition was deemed without merit, leading to the dismissal of the Revenue's appeal and the allowance of the assessee's appeal. The cross objection was disposed of accordingly, granting the assessee consequential benefits as per the law.

In conclusion, the Appellate Tribunal CESTAT KOLKATA ruled in favor of the assessee, setting aside the impugned order and allowing the assessee's appeal while dismissing the Revenue's appeal. The Tribunal emphasized the eligibility of cenvat credit on capital goods upon receipt in the factory premises and highlighted the necessity of specifying the sub-rule under which penalties are imposed under Rule 15 of the Cenvat Credit Rules, 2004.