2004 (3) TMI 221 - AT - Central Excise

Summary

Issues:
- Availment of Cenvat credit on capital goods under Cenvat Credit Rules, 2001/2002.
- Interpretation of Rule 4(2)(a) & (h) of Cenvat Rules, 2001.
- Transfer of capital goods to another unit affecting the availment of credit.
- Changes in the rules w.e.f. 1-3-2002 and their applicability.
- Comparison with previous rules for determining credit availment.

Analysis:
The appellant appealed against the Commissioner (Appeals) order rejecting their appeal and upholding the lower authority's decision to demand Rs. 97,062/- availed as credit on capital goods and imposing a penalty of Rs. 5,000/-. The appellant availed 100% credit of duty on capital goods instead of the stipulated 50% under Rule 4(2)(a) of Cenvat Rules, 2001. The lower authority's contention was that the appellant should have taken only 50% of the duty paid in the financial year of receiving the capital goods. The Commissioner upheld this view, leading to the current appeal.

The Tribunal analyzed Rule 4(2)(a) & (h) of Cenvat Rules, 2001, which limited the credit of duty on capital goods to 50% in the financial year of receipt, with the balance to be taken in subsequent years if the goods were in possession and use. However, as the appellant had transferred the goods to another unit, this condition was not met. The Tribunal noted that the intention of the legislature was not to defeat the purpose of the Cenvat Rules, and in this case, applying the rule would result in only 50% credit despite full duty payment on the capital goods.

The Tribunal highlighted a change in the rules effective from 1-3-2002, allowing full credit of duty paid on capital goods in the same financial year if the goods were cleared as such. Although the impugned goods were received and removed in the same financial year before this provision, the Tribunal referred to previous rules permitting full credit in such cases. It invoked the General Clauses Act, 1897, to suggest that the rules in force before and after a specific period should be deemed applicable during that period. Consequently, the Tribunal allowed the appeal, setting aside the Commissioner (Appeals) order.

In conclusion, the Tribunal's decision favored the appellant, allowing them to avail 100% credit of duty paid on the capital goods received in their factory, based on the interpretation of the Cenvat Rules and the application of relevant legal principles.