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2024 (6) TMI 581 - HC - Central ExciseCENVAT credit availed on capital goods procured in 2007-08 and 2008-09 but installed in 2011 - HELD THAT - A conjoint reading of the provisions of Rule 2 (a) and Rule 4 of the Rules of 2004 go to show that while Rule 2 (a) lays down the definition of capital goods , the conditions for providing CENVAT credit under the Rules are laid down under Rule 4. A plain reading of Rule (2) (b) of Rule 4 shows that balance of CENVAT credit may be availed in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer. Rule (2) (a) of Rule 4 of the Rules of 2004 provides that CENVAT credit in respect of capital goods received in a factory or in the premises of the provider at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. It is no doubt correct that as per Rule 2 (a) of the Rules of 2004 it would be open for the assessee to avail upto 50% of CENVAT credit in the financial year when the capital goods were procured. However, Rule 2 (a) of the Rules does not make it mandatory for the assessee to lodge a claim for Cenvat Credit only in the year of procurement of the machinery - in the facts and circumstances of the present case, there is no cogent basis for this Court to conclude that the assessee had illegally availed CENVAT credit for procurement of the capital goods pertaining to the years 2010-11 and 2011-12. Consequently, the order for recovery of the amount of CENVAT credit as affirmed by the learned Tribunal is held to be unsustainable in the eyes of law. The Commissioner (Appeals), Customs, Central Excise and Service Tax, Guwahati, was not correct in passing the order dated 25/11/2014 particularly in so far as allowing the demand for recovery of Rs. 15,95,332/- as CENVAT credit availed by the appellant on the capital goods is concerned. Appeal allowed.
Issues Involved:
1. Legality of CENVAT credit availed on capital goods procured in 2007-08 and 2008-09 but installed in 2011. 2. Validity of the recovery of Rs. 15,95,332/- as CENVAT credit by the Revenue. Summary: Issue 1: Legality of CENVAT credit availed on capital goods procured in 2007-08 and 2008-09 but installed in 2011. The appellant, engaged in the manufacture of oxygen/nitrogen, availed CENVAT credit on capital goods procured in 2007-08 but installed in 2011. The Revenue contended that CENVAT credit amounting to Rs. 22,93,920/- was available only during the financial years 2007-08 and 2008-09 as per Rule 4 (2) of the Cenvat Credit Rules. The Commissioner (Appeals) held that the appellant violated para 2B of Notification No. 32/99-CE dated 08.07.1999 by not utilizing the CENVAT credit in the month it was available, rendering them non-entitled to the benefit of the notification. The CESTAT, however, allowed the appeal to the extent of setting aside the demand of Rs. 22,93,920/- while upholding the recovery of Rs. 15,95,332/-. Issue 2: Validity of the recovery of Rs. 15,95,332/- as CENVAT credit by the Revenue. The appellant argued that there is no provision in the CENVAT Credit Rules, 2004 or the Central Excise Notification dated 08.07.1999 mandating that CENVAT credit must be availed in the year of procurement. The Supreme Court decisions in Madras Cements Ltd. vs. Commissioner of Central Excise and KCP Ltd. vs. Commissioner of Central Excise, Chennai were cited to support that CENVAT credit can be availed when the capital goods are utilized for manufacturing. The Court found that Rule 4 of the Cenvat Credit Rules, 2004 does not create an embargo on claiming CENVAT credit in subsequent financial years provided the capital goods are installed and used in the factory. The Court concluded that the assessee's claim for CENVAT credit was valid as long as it was availed during the period of exemption under the Notification dated 08.07.1999. Judgment: The Court held that the Commissioner (Appeals) and the CESTAT erred in allowing the recovery of Rs. 15,95,332/- as CENVAT credit availed by the appellant on the capital goods. Consequently, the judgment and order dated 02.05.2018 passed by the CESTAT to the extent of allowing the recovery was set aside. The appeal was allowed, and parties were to bear their own costs.
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