2021 (6) TMI 62 - AT - Central Excise

Area-based exemption - Capital goods - exempt goods - N/N. 49/2003-CE dated 10.6.2003 - HELD THAT - The credit is available to the assessee on capital goods in terms of Rule 3 of Cenvet Credit Rules, 2004 if the said goods used in the manufacture of dutiable goods. However, these capital goods have been used for manufacture of dutiable goods, in that circumstance, the assessee is entitled to take credit. Admittedly, the facts are not in dispute that these goods have been installed during the period November, 2015 to March, 2016, the appellant opted out of area based exemption which clearly indicates that the appellant used capital goods for manufacture of dutiable goods. It is admitted fact that the goods have been used by the manufacture of dutiable goods, therefore, in terms of Rule 3 of the Cenvet Credit Rule,2004 the appellant is entitled to avail credit - Appeal allowed.

Summary

Issues:
- Denial of credit under Notification No.13/2016-CE (NT) dated 1.3.2016 on capital goods used in manufacturing dutiable goods.

Analysis:
The appellant, located in Himachal Pradesh, availed area-based exemption but later opted out of it to manufacture dutiable goods. The appellant purchased capital goods installed between Nov. 2015 and March 2016. A show cause notice was issued for reversal of credit taken on these goods due to Notification No.13/2016-CE dated 1.3.2016, which restricts credit on capital goods used in manufacturing exempted goods. The appellant argued they are entitled to credit as they used the goods for manufacturing dutiable products. The appellant cited precedents like Welspun India Limited vs. CCE, Surat-2019 and International Cylinders Pvt. Ltd. vs. CCE & ST -2019 to support their case.

The respondent contended that as the capital goods were purchased when the appellant exclusively manufactured exempted goods, they are not eligible for credit under Notification No.13/2016-CE dated 1.3.2016, which applies prospectively.

After hearing both sides, the Tribunal found that the credit is available on capital goods under Rule 3 of Cenvet Credit Rules, 2004 if used in manufacturing dutiable goods. Since the appellant used the goods for dutiable products after opting out of area-based exemption, the notification in question does not apply. The Tribunal emphasized that the goods were indeed used for manufacturing dutiable goods, making the appellant eligible for credit. The Tribunal dismissed the relevance of the case laws cited by the appellant, stating they do not apply to the current case.

In conclusion, the impugned order denying credit was set aside, and the appeal was allowed with any consequential relief.