2021 (8) TMI 799 - AT - Central Excise

CENVAT Credit - capital goods - denial on the ground that the final product is exempted from payment of duty and as per Rule 6(4) of the Cenvat Credit Rules, 2004 - HELD THAT - The appellant is a manufacturer of cotton yarn and woven fabrics of cotton. It is also fact that the appellant is entitled for benefit of N/N. 29/2004-CE dated 09.07.2004 for their clearances at concessional rate of duty and N/N. 30/2004-CE dated 09.07.2004 without payment of duty if they do not avail cenvat credit on inputs. The N/N. 29/2004-CE dated 09.07.2004 was amended by Notification No. 58/2008-CE dated 09.07.2008 wherein the goods were exempted from payment of duty. The N/N. 59/2008-CE dated 07.12.2008 was also issued along with the N/N. 58/2008-CE dated 07.12.2008 which prescribed concessional rate of duty at the rate of 4% for clearance of the goods manufactured by the appellant, therefore, it cannot be said that during the period 07.12.2008 till 07.07.2009, the goods manufactured by the appellant were totally exempt from payment of duty. The said notification was also not brought on record by the Learned AR. Therefore, the version of Learned AR is totally mis-conceived and not according to the facts on record. The cenvat credit on capital goods during the impugned period cannot be denied to the appellant. Further, even if it is agreed that N/N. 29/2004-CE read with N/N. 58/2004-CE was considered which provided full, unconditional exemption notification up to 6.7.2009, capital goods credit would not have been available during that period. Once the duty became payable from 7.7.2009, the appellant was entitled to take credit on the capital goods used in the manufacture of the goods. No time limit has been prescribed for availing CENVAT credit on capital goods. As long as the capital goods in question were used in the manufacture of dutiable goods (post 7.7.2009), nothing stops the appellant from taking CENVAT credit even on the capital goods received earlier (up to 6.6.2009) but also used post 7.7.2009. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Denial of CENVAT credit on capital goods.
2. Applicability of Rule 6(4) of the Cenvat Credit Rules, 2004.
3. Simultaneous availment of multiple exemption notifications.
4. Maintenance of separate accounts for different notifications.
5. Admissibility of CENVAT credit when manufacturing both dutiable and exempted goods.

Issue-wise Detailed Analysis:

1. Denial of CENVAT Credit on Capital Goods:
The appellant was denied CENVAT credit on capital goods for the period February 2009 to December 2009, amounting to ?3,03,30,950/-, on the grounds that their final product was exempted from payment of duty. According to Rule 6(4) of the Cenvat Credit Rules, 2004, no CENVAT credit is allowed on capital goods used exclusively in the manufacture of exempted goods or services. The appellant argued that they availed benefits under both Notification No. 29/2004-CE and Notification No. 30/2004-CE, paying duty on some goods while clearing others without payment of duty. They contended that capital goods were used in the manufacture of both dutiable and exempted goods, thus CENVAT credit should not be denied.

2. Applicability of Rule 6(4) of the Cenvat Credit Rules, 2004:
The appellant argued that Rule 6(4) of the Cenvat Credit Rules, 2004, which denies credit on capital goods used exclusively for exempted goods, was not applicable in their case. They maintained that the capital goods were used for manufacturing both dutiable and exempted goods. The Tribunal agreed, noting that the appellant had cleared goods on payment of duty during the impugned period, thus the capital goods were not used exclusively for exempted goods.

3. Simultaneous Availment of Multiple Exemption Notifications:
The appellant availed benefits under both Notification No. 29/2004-CE (partial exemption) and Notification No. 30/2004-CE (full exemption). The Revenue argued that the appellant did not maintain separate accounts for goods availing benefits under these notifications, as required by the Board’s Circular. The Tribunal found that the appellant had the option to choose the most beneficial notification for each type of clearance and had actually paid duty on some clearances, thus they were entitled to CENVAT credit on capital goods.

4. Maintenance of Separate Accounts for Different Notifications:
The Revenue contended that the appellant failed to maintain separate accounts for goods cleared under different notifications. The appellant countered that separate records were only required for inputs and input services, not for capital goods. The Tribunal agreed with the appellant, stating that Rule 6(2) of the Cenvat Credit Rules, 2004, required separate records for inputs and input services, but not for capital goods.

5. Admissibility of CENVAT Credit When Manufacturing Both Dutiable and Exempted Goods:
The appellant argued that they manufactured both dutiable and exempted goods, thus CENVAT credit on capital goods should not be denied. The Tribunal noted that the appellant had cleared goods on payment of duty during the impugned period and that similar issues had been decided in the appellant’s favor in previous cases. The Tribunal concluded that the appellant was entitled to CENVAT credit on capital goods, as they were not used exclusively for exempted goods.

Conclusion:
The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief. It was determined that the appellant was entitled to CENVAT credit on capital goods during the impugned period, as they had used the capital goods for manufacturing both dutiable and exempted goods and had actually paid duty on some clearances. The Tribunal emphasized that the appellant’s case was consistent with previous rulings and that the Revenue could not take a divergent view on the same issue.