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2019 (3) TMI 1221 - AT - Central ExciseCENVAT Credit - common capital goods used in manufacture of taxable as well as exempt goods - fruit pulp based product namely Maaza - Sub-rule (4) of Rule 6 of the Cenvat Credit Rules, 2004 - extended period of limitation - Held that - The machine are required for manufacture of Sweetened Aerated Water and Fruit Juice/Pulp based Ready to Serve Beverages - the assessee always had an intention to use the capital goods for manufacture of fruit pulp based soft-drinks as also for manufacture of aerated water. The Hon ble Allahabad High Court in M/S. BRINDAWAN BEVERAGES PVT. LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCIS 2014 (2) TMI 1099 - ALLAHABAD HIGH COURT had directed the Lower Authority to examine such aspect and has observed that if the assessee had the intention to manufacture both the types of goods i.e. exempted goods as also dutiable, the benefit of Cenvat Credit has to be allowed. The Adjudicating Authority has observed that inasmuch as the machine is designed to handle carbonated/aerated soft drinks by software changes and minor adjustment, the objective can be achieved without any modification and as such the assessee has to be held as admissible to cenvat credit. Revenue has not advanced any justifiable ground to interfere in the said order of the Commissioner - appeal dismissed - decided against Revenue.
Issues:
1. Denial of Cenvat credit on capital goods exclusively used for exempted final product. 2. Interpretation of eligibility conditions for Cenvat credit under Rule 6 of Cenvat Credit Rules, 2004. 3. Examination of manufacturer's certificate for machine capability and modification. 4. Verification of intention to use capital goods for both exempted and dutiable goods. 5. Adjudication of the appeal based on High Court directions and examination of relevant documents. Issue 1: Denial of Cenvat credit on capital goods exclusively used for exempted final product The case involved a dispute where the Revenue contended that the assessee, engaged in manufacturing aerated waters and fruit pulp-based drinks, should be denied Cenvat credit on capital goods used exclusively for the exempted product 'Maaza.' The Tribunal upheld the denial of credit, stating that eligibility conditions must be fulfilled at the time of receiving capital goods, and subsequent use for dutiable goods does not alter eligibility. However, the High Court remanded the matter, emphasizing that if the machine was used for both exempted and dutiable goods, the benefit of credit should not be denied. Issue 2: Interpretation of eligibility conditions for Cenvat credit under Rule 6 of Cenvat Credit Rules, 2004 The Tribunal initially rejected the assessee's plea that the machine could be used for dutiable goods without modification. However, the High Court noted discrepancies in the Tribunal's interpretation and manufacturer's certificates. The High Court emphasized that minor adjustments did not constitute modification and remanded the case for fresh consideration, focusing on the machine's capability without modification. Issue 3: Examination of manufacturer's certificate for machine capability and modification The manufacturer's certificates played a crucial role in determining the machine's capability for manufacturing both exempted and dutiable goods. The High Court highlighted that the machine could handle carbonated drinks with minor adjustments and software changes, without requiring modification. The certificate clarified that the machine, manufactured in Germany and imported to India, could not be modified in India. Issue 4: Verification of intention to use capital goods for both exempted and dutiable goods The Adjudicating Authority examined various documents, including letters and certificates, to establish the assessee's intention to use the capital goods for both exempted fruit pulp drinks and aerated waters. The Authority observed that the machine was designed to handle aerated drinks without modification, supporting the assessee's claim for Cenvat credit. Issue 5: Adjudication of the appeal based on High Court directions and examination of relevant documents The Commissioner's order, dropping the demand for Cenvat credit, considered the High Court's directions and various documents indicating the assessee's intention to use the capital goods for both exempted and dutiable goods. The Tribunal rejected the Revenue's appeal, noting that the Commissioner had appropriately decided the issue in line with the High Court's directions and examination of relevant documents, finding no merit in the Revenue's appeal.
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