2013 (6) TMI 527 - AT - Central Excise

Cenvat Credit - bushing as parts of capital goods - credit of 50% denied during the subsequent year as the bushings are not in the possession and use of the appellant. - Held that - As per the provisions of Rule 4(2)(b) of the CENVAT Credit Rules the condition that the same should be in the possession of the manufacturer in the subsequent financial year is not applicable to the components. - credit allowed.

Summary

Issues:
1. Availment of CENVAT credit for bushings as parts of capital goods.
2. Interpretation of Rule 4(2)(a) and (b) of the CENVAT Credit Rules, 2004.
3. Applicability of credit for components as capital goods.
4. Possession requirement for components in subsequent financial years.

Analysis:
The appellant, engaged in glass fibre manufacturing, appealed against the Commissioner of Central Excise's order regarding the availed CENVAT credit for bushings used in the process. The appellant claimed 50% credit initially and the remaining 50% in the subsequent financial year as per Rule 4(2)(a) and (b) of the CENVAT Credit Rules, 2004. However, the Revenue demanded the credit back, arguing that the appellant did not possess the bushings in the subsequent year.

The appellant contended that the bushings were re-exported for re-making after use, and they were entitled to avail the remaining credit in any subsequent financial year as per the rules. They argued that the possession requirement does not apply to components like bushings. On the other hand, the Revenue claimed that the bushings received in the subsequent year were newly manufactured, thus denying the credit for not meeting the possession and use criteria.

The Tribunal analyzed Rule 4(2)(b) of the CENVAT Credit Rules, stating that the possession condition does not apply to components like the bushings. The rule allows the balance of CENVAT credit to be taken in any subsequent financial year if the capital goods are in possession of the manufacturer. Considering this provision, the Tribunal found merit in the appellant's contention, setting aside the impugned order and allowing the appeal.

This judgment clarifies the interpretation of CENVAT credit rules concerning the availment of credit for components used as capital goods and the possession requirements in subsequent financial years. It emphasizes that components like bushings are entitled to credit without the possession condition, providing a favorable outcome for the appellant in this case.