9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (9) TMI 20 - AT - Central ExciseCENVAT credit - Capital Goods - whether under these circumstances the assessee is entitled to the benefit of capital goods CENVAT credit on the disputed Line 3 of the plant? - Held that - A plain reading of the Rule 6(4) of CENVAT Credit Rules 2004 shows that no credit is admissible on capital goods used exclusively in manufacture of exempted goods or in providing exempted services. There is no requirement of the capital goods to be used any specified extent in manufacture of dutiable goods. The Rule as it is framed entitles an assessee to claim credit on capital goods even if the machinery is used to manufacture a single unit of dutiable goods. This appears unfair but equity has no place in matters of taxation and we have to follow the law as it is drafted. Whether the entitlement of capital goods should be decided based on how they are used at the time of receipt of capital goods? - Held that - In this case the plant was capable of manufacturing both exempted and dutiable products and the appellants declared their intention to manufacture both using Line 3. They however never used machinery for the first time of two years to manufacture dutiable goods at all. Thereafter the appellants used machinery to manufacture of dutiable goods for 19 days. Thus it cannot be said that the goods are used exclusively for manufacture of exempted products - the assessee is entitled to the benefit of CENVAT credit on capital goods on the Line 3 of their plant as it was declared to be meant for manufacture of both dutiable and exempted products and used for manufacture of dutiable products although for a mere 19 days. Demand set aside - appeal allowed - decided in favor of appellant.
Issues Involved:
1. Entitlement of CENVAT credit on capital goods used in manufacturing both dutiable and exempted products. 2. Applicability of Rule 6(4) of the CENVAT Credit Rules, 2004. 3. Validity of demand, interest, and penalties imposed under Section 11A of the Central Excise Act and Rule 15(2) of the CENVAT Credit Rules, 2004. 4. Allegation of suppression and mis-declaration for invoking the extended period of demand. Detailed Analysis: 1. Entitlement of CENVAT Credit on Capital Goods: The appellant manufactures both carbonated (dutiable) and non-carbonated (exempted) beverages. They took CENVAT credit on machinery in Line 3, which was capable of manufacturing both types of beverages but was used exclusively for exempted products during 2004-2005 and 2005-2006. The central issue is whether the appellant is entitled to CENVAT credit on capital goods used for manufacturing exempted products during the initial period but intended for dutiable products as well. 2. Applicability of Rule 6(4) of the CENVAT Credit Rules, 2004: Rule 6(4) states that no credit is admissible on capital goods used exclusively in the manufacture of exempted goods. The Learned Commissioner initially denied the credit based on this rule, supported by the case of Surya Roshni Ltd., where the capital goods used exclusively for exempted products were not eligible for credit. However, the Tribunal distinguished this case by noting that the appellant intended to use the machinery for both dutiable and exempted goods, and actually did use it for dutiable goods for 19 days. 3. Validity of Demand, Interest, and Penalties: The demand for recovery of CENVAT credit, along with interest and penalties, was based on the assertion that the machinery was used exclusively for exempted goods during the disputed period. The appellant argued that the credit should not be denied as they had declared their intention to use the machinery for both types of products and had indeed used it for dutiable goods, albeit for a short period. The Tribunal agreed with the appellant, referencing similar cases (Brindavan Beverages Pvt. Ltd. and Pepsico India Holdings Ltd.) where credit was allowed when the machinery was intended for both dutiable and exempted products, even if initially used for exempted products. 4. Allegation of Suppression and Mis-declaration: The respondent argued that the appellant suppressed information and mis-declared the usage of Line 3, justifying the extended period for demand under Section 11A. However, the Tribunal found that the appellant had communicated their plans to use the machinery for both dutiable and exempted products, and there was no evidence of suppression or mis-declaration. The Tribunal concluded that the appellant's actions did not warrant the extended period of demand or the associated penalties. Conclusion: The Tribunal held that the appellant is entitled to CENVAT credit on the capital goods used in Line 3, as the machinery was intended and used for manufacturing both dutiable and exempted products. The demand, interest, and penalties imposed were set aside, and the appeals were allowed. The Tribunal emphasized that the intention and actual use of the machinery for dutiable products, even if minimal, justified the entitlement to CENVAT credit under Rule 6(4) of the CENVAT Credit Rules, 2004. Order: The appeals are allowed, and the Order-in-Original is set aside.
|
