2004 (4) TMI 165 - AT - Central Excise

Summary

Issues:
Availability of Cenvat credit on duty paid capital goods not installed in the factory.

Analysis:
The appeals involved the issue of whether Cenvat credit could be availed for duty paid on capital goods not installed in the factory. The appellant, a manufacturer of various products, imported capital goods under Project Import between November 1995 and May 1996. The appellant argued that they were eligible for Cenvat credit under new Rule 57AC(2)(c) of the Central Excise Rules, 1944, allowing for credit on capital goods not installed but received before 1-4-2000. They relied on circulars clarifying the admissibility of Cenvat credit even if the capital goods were not installed by a certain date. The appellant contended that 'use' in Rule 57AC(2)(b) meant intended use, not actual use, citing relevant case laws to support their argument.

On the other hand, the Revenue argued that Rule 57AA required capital goods to be 'used' in the factory for credit eligibility. They emphasized that installation and use were prerequisites for availing Cenvat credit, as per Rule 57AC(3) and other provisions. The Revenue highlighted the condition that capital goods should be used in manufacturing goods subject to excise duty, which could only be fulfilled after installation and actual use.

The Tribunal analyzed the relevant provisions of the Central Excise Rules in effect from 1-4-2000. It noted that Rule 57AC did not explicitly require installation before availing Cenvat credit on capital goods, unlike the previous Rule 57Q. The Tribunal referred to a Board's circular stating that installation was not a prerequisite for taking credit on capital goods. The Tribunal also cited a case law supporting the view that installation was not a condition for availing credit on capital goods.

Regarding the balance 50% of Cenvat credit, the Tribunal examined Rule 57AC(2)(b), which allowed for credit in subsequent years if the capital goods were still in possession and use. Since the capital goods were not in use in the subsequent financial year, the Tribunal held that the appellant was not eligible for the remaining credit. The Tribunal distinguished the cited case laws provided by the appellant, emphasizing the unique circumstances of those cases. Ultimately, the penalties imposed on the appellant were set aside, and the appeals were disposed of accordingly.