2015 (1) TMI 173 - AT - Central Excise

Denial of CENVAT Credit - advance declaration for prior permission to avail credit - procedure contravention in the form of not filing declaration under Rule 57 - Held that - Rule 57Q did not require any declaration during the relevant period - As regards Rule 57T, no doubt, this rule provides for declaration before receipt of capital goods but in view of the decision of Hon ble High Court of Madras cited supra covering the issue, it is felt that as held by Hon ble High Court, it has to be treated as procedural lapse. Moreover, the credit can be taken immediately, it is not mean that credit cannot be taken at later date at all. Once the admissibility of credit is not denied and utilization of capital goods for the purpose for which they received is accepted and it has been held by Hon ble High Court 2007 (11) TMI 188 - HIGH COURT MADRAS that this has to be treated as procedural lapse, following the judicial precedence and discipline, I am inclined to allow the credit in this case. - Decided in favour of assessee.

Summary

Issues:
1. Denial of Cenvat credit on capital goods due to procedural lapses.
2. Compliance with statutory procedures under Central Excise Rules, 1944 and Cenvat Credit Rules, 2002.
3. Applicability of Rule 57Q and Rule 57T in availing credit.
4. Judicial interpretation on procedural lapses affecting credit eligibility.
5. Verification of capital goods usage and admissibility of credit.

Analysis:

The case involved the appellants, engaged in manufacturing textile machinery, seeking Cenvat credit on capital goods procured for their factory. The dispute arose when the Asst. Commissioner denied the credit, citing non-compliance with statutory procedures under Central Excise Rules, 1944 and Cenvat Credit Rules, 2002. The Commissioner (Appeals) upheld the denial, emphasizing the importance of following legal procedures to enjoy benefits. The grounds for denial included failure to file required declarations and exceeding the time limit for claiming credit.

Upon review, the Tribunal found that the appellants had indeed received and utilized the capital goods in their manufacturing process. The verification by the Range Officer and certification by a Chartered Engineer confirmed the availability and usage of the capital goods. The main contention was the lack of prior declaration for availing credit, as mandated by Rule 57T. However, the Tribunal considered judicial precedents, including a decision by the Hon'ble High Court of Madras, which held that procedural lapses should not automatically disallow credit. The Tribunal noted that while Rule 57T required a declaration before receipt of capital goods, the absence of such declaration could be viewed as a procedural lapse, especially when the admissibility of credit and the proper usage of capital goods were established.

Relying on the judicial interpretation and the principle that procedural lapses should not hinder legitimate credit claims, the Tribunal allowed the appeal and granted the appellants the benefit of Cenvat credit on the capital goods. The decision highlighted the importance of ensuring compliance with statutory procedures while also recognizing the need for a balanced approach when procedural lapses do not impact the substantive eligibility for credit.