2019 (6) TMI 559 - AT - Central Excise

CENVAT credit - capital goods - availment of second installment of 50% of the cenvat credit on the capital goods - Department was of the view that the second installment of 50% of the cenvat credit on the capital goods availed by the appellant in April, 2002, was irregular inasmuch as at the time of availing the second 50% credit, the capital goods were not yet installed for use of the manufacturer - HELD THAT - The capital goods lying in the factory of the appellant pending installation and erection, may be considered as capital goods in possession and use for the manufacture - there is no reason to deny the second instalment of the capital goods. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Availment of cenvat credit on capital goods in two installments.
2. Dispute regarding possession and use of capital goods before availing the second installment.
3. Interpretation of Rule 4(2)(b) of the Cenvat Credit Rules, 2002.
4. Precedents set by the Tribunal and High Courts in similar cases.

Issue 1: Availment of cenvat credit on capital goods in two installments
The appellant, a manufacturer of petroleum products, procured capital goods for setting up a new plant and availed cenvat credit on duty paid in two parts. The Department contested the second installment availed in April 2002, claiming the goods were not yet installed for use. The impugned order directed recovery of the credit with interest and imposed a penalty.

Issue 2: Dispute regarding possession and use of capital goods before availing the second installment
The appellant argued that Rule 4(2)(b) of the Cenvat Credit Rules, 2002, allows availing the second installment when the capital goods are in possession and use. They cited precedents where the Tribunal and High Courts ruled in favor of similar claims. The Revenue contended that possession and use conditions were not met until the goods were fully installed and commissioned.

Issue 3: Interpretation of Rule 4(2)(b) of the Cenvat Credit Rules, 2002
Rule 4(2)(b) states that the balance of cenvat credit on capital goods can be taken in subsequent years if the goods are in possession and use of the manufacturer. The Tribunal referred to previous cases where the interpretation of possession and use was crucial in determining credit eligibility.

Issue 4: Precedents set by the Tribunal and High Courts in similar cases
The Tribunal cited the decision in BPCL's case where it was held that credit could be allowed even if goods were in the factory for installation. The Hon'ble Bombay High Court upheld this decision, emphasizing that possession and use should be considered together. The Hon'ble Gujarat High Court also supported this interpretation. The Tribunal concluded that goods pending installation and erection could be considered in possession and use for manufacture, following the decisions of the Larger Bench and High Courts.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal based on the interpretation of Rule 4(2)(b) and the precedents established by higher courts.