2013 (3) TMI 362 - HC - Central Excise

Cenvat Credit on Capital goods - Rule 4(2)(b) - Balance 50% of credit - According to the Revenue, the assessee was not entitled to avail of the balance fifty per cent credit during the year 2002-03 since the capital goods were still at the stage of erection and had not actually been put to use. - Held that - The assessee was entitled to avail of the balance fifty per cent credit during the year 2002-03 as the capital goods were lying in the factory for installation and the process of erection was being carried out. The requirement that the goods were in the possession and use of the manufacturer in the year in which the balance of credit was availed of has been fulfilled and the issue of limitation therefore is also of no practical relevance. The Appeal is accordingly dismissed. There shall be no order as to costs.

Issues: Interpretation of Rule 4(2)(b) of the Cenvat Credit Rules regarding availing of balance credit for capital goods, Prematurity of credit availment, Possession and use of capital goods, Finding of fact by the Tribunal, Substantial questions of law, Limitation period, Disposal of the Appeal, Cross Objection

Interpretation of Rule 4(2)(b) of the Cenvat Credit Rules:
The case involved a dispute regarding the interpretation of Rule 4(2)(b) of the Cenvat Credit Rules concerning the availing of the balance credit for capital goods. The appellant had received capital goods for a project and availed of fifty percent of the duty paid on the goods as credit in one financial year, with the remaining fifty percent taken in the subsequent year. The Revenue contended that the balance credit was prematurely availed of as the goods were still in the stage of erection and not in actual use. However, the Tribunal interpreted that the requirement of "possession and use of the manufacturer of final products" meant the goods were available for use in manufacturing, even if in the factory for installation. The Tribunal's finding was that the goods were indeed in possession and use for manufacturing, thus fulfilling the conditions of Rule 4(2)(b).

Prematurity of credit availment and Finding of fact by the Tribunal:
The dispute also revolved around the prematurity of availing the balance credit for the capital goods. The Commissioner had found the credit availment to be premature, but the Tribunal disagreed. The Tribunal's factual determination was that the capital goods were present in the factory for installation and the erection process was ongoing, indicating possession and use for manufacturing purposes. This finding led to the conclusion that the balance credit was rightfully availed of in accordance with the rules.

Substantial questions of law and Limitation period:
The High Court noted that based on the Tribunal's interpretation and factual findings, no substantial questions of law arose from the case. The Court found that the Tribunal's understanding of Rule 4(2)(b) in the given circumstances did not warrant any legal issues. Consequently, the issue of limitation was deemed irrelevant in light of the factual background and the Tribunal's decision. Therefore, the Court dismissed the Appeal, emphasizing that no substantial legal questions arose for consideration.

Disposal of the Appeal and Cross Objection:
As a result of the dismissal of the Appeal filed by the Revenue, the Cross Objection filed by the Applicant was not pressed by the Counsel and was disposed of accordingly. The judgment concluded with the dismissal of the Appeal and no order as to costs, signifying the resolution of the legal dispute between the parties concerning the availing of Cenvat credit for capital goods under Rule 4(2)(b) of the Cenvat Credit Rules.

This summary highlights the key issues addressed in the judgment, including the interpretation of relevant rules, factual findings by the Tribunal, legal implications, and the final disposition of the Appeal and Cross Objection.

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