2013 (11) TMI 1292 - AT - Central Excise

Cenvat credit under 4(2)(a) of CENVAT Credit Rules, 2004 - Receipt of capital goods Waiver of Pre-deposit Held that - The capital goods receipt took place prior to March 2011 - the trial production of Maaza was conducted between 14.03.2011 to 18.03.2011 and commercial production started from 29.03.2011 - Relying upon COMMR. OF C. EX. & CUSTOMS, VADODARA-II Versus GUJARAT PROPACK 2008 (9) TMI 170 - GUJARAT HIGH COURT - the usage of the machine is to be seen with regard to its intention to produce the goods -the intention of the assessee was to utilize the machine for manufacturing of Maaza and commercial production having started on 29.03.2011, CENVAT Credit availed in March 2011, cannot be faulted with - the appellant has made out a prima facie case complete waiver of the amounts - Applications for waiver of pre-deposit allowed and recovery stayed till the disposal of appeals Stay granted.

Summary

Issues:
Waiver of pre-deposit of CENVAT Credit amount, interest, and penalty imposed on the main appellant and an individual.

Analysis:
The Stay Petitions were filed seeking waiver of pre-deposit of CENVAT Credit amount, interest, and penalty imposed on the main appellant and an individual. The adjudicating authority confirmed the demand on the main appellant for availing CENVAT Credit on capital goods received during a period when the final product manufactured from these goods was exempt from duty payment. The appellant argued that the capital goods, a bottle forming and sealing machine, were intended for manufacturing 'Maaza,' an agricultural-based product. The installation and testing of the machine were completed by March, with commercial production of 'Maaza' starting on 29.03.2011. The appellant claimed CENVAT Credit in March 2011 when 'Maaza' became a dutiable product. The appellant contested the reliance on the Larger Bench decision in the case of Spenta International Ltd., stating it misinterpreted the precedent set by the case of Surya Roshni Ltd., upheld by the Supreme Court.

The Departmental Representative referred to the Spenta International Ltd. decision, emphasizing that CENVAT Credit on capital goods can only be allowed if the final product is dutiable at the time of receiving the capital goods. The Tribunal analyzed Rule 4(2)(a) of CENVAT Credit Rules, 2004, which outlines conditions for availing CENVAT Credit on capital goods. The Tribunal noted that the capital goods were received and tested before March 2011, with commercial production of 'Maaza' starting on 29.03.2011, as confirmed by the Department's records. Despite the Revenue's reliance on the Spenta International Ltd. decision, the Tribunal found the judgment of the Hon'ble High Court of Gujarat in the case of Gujarat Propack, delivered after the Larger Bench decision, to be more relevant. The High Court's judgment emphasized that the machine's usage should be assessed based on its intent to produce goods. As the appellant intended to use the machine for manufacturing 'Maaza,' and commercial production began in March 2011, the CENVAT Credit taken in that month was deemed valid.

Considering the conflicting judicial views, the Tribunal held that the High Court's subsequent decision prevailed over the Larger Bench's decision, as the former was from a superior judicial forum. The Tribunal found that the appellant had established a prima facie case for complete waiver of the amounts in question. Therefore, the applications for waiver of pre-deposit were allowed, and recovery stayed pending the disposal of appeals.