2015 (2) TMI 342 - AT - Central Excise

Denial of CENVAT Credit - Availment and utilization of credit before actual installation of the capital goods - Port Services - service tax paid under section 66 A of the said Act is not qualified to avail the Cenvat credit as the same has not been specified under Rule 3 of Cenvat credit Rule 2004 - Held that - In the case of capital goods, the CENVAT rules do not provide installation of capital goods as a pre-requisite for taking CENVAT credit. The credit can be taken as and when the capital goods are received in the factory. For such capital goods which were received prior to 1.4.2000 but not installed upto 1.4.2000 also, the CENVAT credit would also be admissible. It may, however, be noted that in respect of all capital goods whether received on or after 1.4.2000 or those that were received prior to 1.4.2000 but not yet installed, the condition that CENVAT credit only up to 50%of the total admissible amount would be available in the financial year 2000-2001 would apply. The balance of the CENVAT credit in respect of such capital goods can be taken in a financial year subsequent to 2000-2001. During the period 01.04.2000 to 09.09.2004, the balance of 50% of CENVAT credit cannot be allowed in the subsequent year unless the capital goods are put to use and mere possession is not enough. - Thus it is apparent that the condition of installation for availing Cenvat Credit on capital goods was effective till 09.09.2004 and not thereafter. In the present case the capital goods have been procured after this date, in the year 2007-08. - In view of retrospective amendment made to sub-rule (1) of Rule 3 of Cenvat Credit Rules, 2004 by inserting clause (ixa) with effect from 18.4.2006, I conclude that the notice is eligible to take CENVAT credit of the Service Tax paid under Section 66A of the Finance Act, 1994. - Decided against Revenue.

Summary

Issues:
Appeal against adjudication order dropping proceedings under Show Cause Notice - Eligibility of cenvat credit on capital goods and input services - Interpretation of relevant circulars and case laws.

Analysis:
The appeal before the Appellate Tribunal CESTAT Ahmedabad pertained to the adjudication order passed by the Commissioner of Customs and Central Excise, Rajkot, where proceedings initiated under a Show Cause Notice were dropped. The case involved the eligibility of cenvat credit on capital goods and input services, specifically focusing on the denial of credit due to alleged utilization before the actual installation of capital goods. The Revenue, as the appellant, contended that the adjudicating authority overlooked the eligibility criteria for cenvat credit and should have examined it before passing the order. The respondent argued that the eligibility of cenvat credit was not disputed during the proceedings and raised objections to the Revenue's grounds before the Tribunal. The respondent referenced various legal precedents to support their position, highlighting that the Revenue's challenge on the eligibility of cenvat credit was impermissible under the law.

Upon thorough examination and consideration of the arguments presented by both parties, the Tribunal delved into the interpretation of relevant circulars to determine the eligibility of cenvat credit on capital goods. The Tribunal referred to Circulars issued by the Central Board of Excise and Customs (CBEC) clarifying that the condition of installation for availing cenvat credit on capital goods was effective until a specified date, beyond which installation was not a prerequisite. The Tribunal also cited a judgment by the Bombay High Court in a similar case, emphasizing that the possession and use of capital goods were crucial factors for availing cenvat credit, irrespective of the installation status. Additionally, the Tribunal considered a retrospective amendment to Rule 3 of the CENVAT Credit Rules, 2004, which allowed for the credit of Service Tax paid under a specific section of the Finance Act, 1994.

In the final analysis, the Tribunal rejected the Revenue's appeal, noting that the Revenue did not dispute the findings of the Adjudicating Authority regarding the eligibility of cenvat credit. The Tribunal emphasized that the issue raised by the Revenue was not brought before the adjudicating authority and cited legal principles to support the decision. Ultimately, the Tribunal found no reason to interfere with the Adjudicating Authority's order, thereby dismissing the Revenue's appeal and upholding the decision to drop the proceedings initiated under the Show Cause Notice.

This comprehensive analysis of the judgment highlights the nuanced legal arguments, interpretation of circulars and case laws, and the Tribunal's reasoning behind the decision to reject the Revenue's appeal.