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2023 (7) TMI 105 - AT - Central ExciseCenvat credit on capital goods - No credit was availed in the initial (first) year - Whole of the credit (100% credit) was availed in the subsequent year - contravention of Rule 4(2)(a) of Cenvat Credit Rules 2004 on the ground of nonavailment and utilization of Cenvat Credit in its initial period - N/N. 32/99-CE dated 08.07.1999 - time limitation - HELD THAT - The due date of filing of monthly Returns and Refund claim for the month of April, 2007 was 7th of May 2007. Had there been any dispute of wrong availment of Cenvat credit, the department should have issued the impugned show cause notice by 7th of May, 2008, whereas, the show cause notice was issued on the appellants on 17th November 2008 after a lapse of more than one year from the date of submission of first ER-I return and Refund claim under Notification No.32/99-CE dated 08.07.1999 - the impugned order-in-Original dated 31.12.2009 is not sustainable on the ground of limitation and liable to be set aside. A plain reading of the provisions of Rule 4(2)(a) of the Cenvat Credit Rules, 2004 makes it clear that a manufacturer can take credit in the financial in which the capital goods are received for an amount not exceeding 50% of the specified duty paid on the capital goods. The balance credit is permitted to be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of manufacture . There is neither restriction nor compulsion to avail and utilize Cenvat credit on capital goods in the initial year of receipt of capital goods. The Appellant at their discretion may or may not opt for avail and utilize the Cenvat credit on capital goods in the initial year. The contention of the department that the Appellant contravened the provisions of Cenvat credit by not utilizing 50% of the capital goods in the first years of its receipt is misconceived and not tenable in the eyes of law - the Appellant has not violated any provisions of the Cenvat Credit Rules, 2004, by foregoing the credit in the initial years of its receipt and availing the full credit in the subsequent year. There was no violation in the refund sanctioned to the Appellant - the impugned order is liable to be set aside on merit also - Appeal allowed.
Issues Involved:
1. Limitation for issuing the Show Cause Notice. 2. Merits of the allegation of wrong availment of Cenvat credit on capital goods. Summary: Limitation for Issuing the Show Cause Notice: The Appellant argued that the demand is barred by limitation as the show cause notice dated 17.11.2008 was issued after more than one year from the date of submission of the first ER-I return and refund claim under Notification No.32/99-CE dated 08.07.1999. The due date for filing the monthly returns and refund claim for April 2007 was 7th May 2007, and any dispute should have been raised by 7th May 2008. The Tribunal agreed with the Appellant that the notice should have been issued on or before 07.05.2008, making the demand unsustainable on the ground of limitation. Merits of the Allegation of Wrong Availment of Cenvat Credit on Capital Goods:The Appellant contended that the allegation of wrong availment of Cenvat credit on capital goods in contravention of Rule 4(2)(a) of the Cenvat Credit Rules, 2004 is not tenable. They argued that the manufacturer has the option to avail less than 50% credit in the first year and may avail the whole credit in subsequent years. The Tribunal observed that Rule 4(2)(a) allows the manufacturer to take credit for an amount 'not exceeding 50%' in the initial year, with the balance credit permitted in any subsequent financial year. There is no restriction or compulsion to avail and utilize Cenvat credit on capital goods in the initial year of receipt. The Tribunal held that the Appellant did not violate any provisions of the Cenvat Credit Rules, 2004, by deferring the credit to subsequent years, and thus, the allegation of contravention was misconceived. Conclusion:The Tribunal concluded that the demand is not sustainable on the ground of limitation and on merits. Consequently, the appeal filed by the Appellant was allowed, and the impugned order was set aside. (Order pronounced in the open court on 28 June 2023.)
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