2019 (7) TMI 782 - AT - Central Excise

CENVAT Credit - capital goods - credit for the period when the goods manufactured by the appellant are taxable and whether the same lapses subsequently when the appellant had availed SSI exemption? - period March 2003 to June 2004 - HELD THAT - On a cogent or harmonious reading of various provisions it is evident that what lapses on the date the asssessee avails SSI exemption is only cenvat credit related to input or input services - This view was fortified by the provisions of Rule 6(4) of CCR which provides that an assessee is entitled to take cenvat credit on capital goods even during the period they were availing SSI exemption. However under Clause (IV) in para 2 of the SSI exemption notification the utilisation of such cenvat credit taken on capital goods during the period of enjoying the SSI exemption is suspended. The CENVAT credit of capital goods does not lapse and was rightly availed by the appellants and subsequently utilised when they stopped availing the SSI exemption. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether cenvat credit on capital goods lapses when the appellant avails SSI exemption.

Analysis:
The judgment dealt with the issue of whether the cenvat credit taken on capital goods during a period when the goods manufactured by the appellant were taxable lapses when the appellant subsequently availed SSI exemption. The appellant, engaged in manufacturing marble slabs/sheets, had acquired capital goods between March 2003 and June 2004 and took cenvat credit. Following a Supreme Court ruling and a subsequent amendment in Chapter Note VI, the appellant's products became taxable. The appellant then availed SSI exemption from June 30, 2006. The Revenue contended that the cenvat credit on capital goods lapsed under Section 11(2) of the Cenvat Credit Rules when the appellant availed SSI exemption and therefore could not be carried forward or utilized after resuming duty payments in March/April 2007.

The relevant provisions included Notification No.8/2003, Rule 11(2) of the Cenvat Credit Rules, 2002, and Rule 6(4) of the Cenvat Credit Rules, 2004. The Notification specified conditions for availing SSI exemption, while Rule 11(2) dealt with the lapse of cenvat credit when opting for duty exemption. Rule 6(4) restricted cenvat credit on capital goods used exclusively for manufacturing exempted goods. The Tribunal analyzed these provisions and concluded that only cenvat credit related to input or input services lapses when an assessee avails SSI exemption. The Tribunal emphasized that an assessee can avail cenvat credit on capital goods even during the SSI exemption period, but the utilization of such credit during the exemption period is suspended as per the SSI exemption notification.

The Tribunal held that the cenvat credit of capital goods did not lapse and was rightfully availed by the appellants. The judgment allowed the appeal on both merits and limitation, as the issue primarily revolved around interpretation. The impugned order was set aside, and the appellants were granted consequential benefits. The Tribunal's decision clarified that the cenvat credit on capital goods remains available and can be utilized when the SSI exemption is no longer in effect.