2022 (3) TMI 452 - AT - Central Excise

Recovery of CENVAT Credit - capital goods though received and installed before the manufacture of a product earlier was exempted - availability of credit when the production started become dutiable - case of the department is that since the capital goods were received before 01.03.2011 and at that time the product Maaza was exempted - HELD THAT - From Rule 6(4) of Cenvat Credit Rules, 2004, it is clear that Cenvat Credit shall not be allowed on capital goods which are used exclusively in the manufacture of exempted said goods. As per the facts of the present case, though the capital goods were received during the period 13.10.2010 to 28.02.2011 but as per submission of the appellant the trial production on said capital goods for manufacture of goods namely Maaza was undertaken on 14.03.2011 and commercial production of the said goods was commenced on 29.03.2011 with this fact it clear that since this machine was not used prior to 14.03.2011 for manufacture of any goods, it cannot be said that the said machine was used exclusively for manufacture of exempted goods. It is the contention in the show cause notice as well as in the impugned order that when the capital goods in question was received, the appellant was engaged in the manufacture of exempted goods however it is not clear whether the said capital goods were used in the manufacture of exempted goods - even if the goods per se were exempted during the receipt and installation of the capital goods but if the said capital goods were not put to use for manufacture of any exempted goods it cannot be said that the said capital goods were used exclusively for manufacture of exempted goods in terms of Rule 6(4) of Cenvat Credit Rules, 2004. In the fact of the present case the capital goods even though receipt earlier but when it started manufacturing the goods were dutiable i.e. from 01.03.2011. In this position, it appears that the capital goods on which the cenvat was claimed by the appellant was never used exclusively for manufacture of exempted goods. However, since the adjudicating authority has decided the case only on the basis that at the time of receipt of capital goods the product was exempted, therefore, the fact regarding commencement of such capital goods and the status of finished goods manufactured from that capital goods whether the same was dutiable or exempted needs to be verified. Penalty on Shri Amit Radheshyam Gupta in terms of Rule 26 of Central Excise Rules, 2002 - HELD THAT - The issue involved is of interpretation of Cenvat Credit Rules, 2004 hence there is no malafide involved. Therefore, the personal penalty in this case cannot be imposed on the employee of the appellant's company. The impugned order is set aside and the matter remanded to the adjudicating authority for passing a fresh order after giving sufficient opportunities to the appellant. - Appeal allowed by way of remand. The matter deserves to be re-considered

Summary

Issues:
- Eligibility of Cenvat Credit on capital goods received before product became dutiable
- Interpretation of Rule 6(4) of Cenvat Credit Rules, 2004
- Applicability of previous legal judgments on the case
- Imposition of personal penalty on the employee of the appellant's company

Eligibility of Cenvat Credit on Capital Goods:
The appellants, engaged in manufacturing aerated water and beverages, filed appeals against an order demanding recovery of Cenvat credit availed on capital goods received during a period when the final products were exempted from duty. The appellants argued that they rightfully availed the credit upon the commencement of commercial production of dutiable goods. The tribunal noted that the capital goods were not used exclusively for exempted goods, as per Rule 6(4) of Cenvat Credit Rules, 2004. The case was remanded for verification of the status of finished goods manufactured from the capital goods.

Interpretation of Rule 6(4) of Cenvat Credit Rules, 2004:
Rule 6(4) prohibits Cenvat credit on capital goods exclusively used for exempted goods. The tribunal emphasized that if capital goods were not utilized for manufacturing exempted goods, they could not be deemed exclusively used for such goods. The tribunal highlighted the importance of the date of commencement of use of capital goods for determining eligibility for Cenvat credit.

Applicability of Previous Legal Judgments:
The tribunal analyzed various legal precedents cited by both parties, emphasizing the need for verification of facts specific to the case at hand. It differentiated the present case from previous judgments based on the timing of product dutiability and the actual use of capital goods for exempted goods. The tribunal stressed the importance of factual verification in determining the applicability of legal precedents.

Imposition of Personal Penalty:
Regarding the penalty imposed on the Zonal Finance Head of the company, the tribunal ruled that there was no malafide intent involved in the interpretation of Cenvat Credit Rules, 2004. Consequently, the personal penalty on the employee was set aside, and the appeal was allowed.

In conclusion, the tribunal remanded the case for further consideration based on the observations made regarding the utilization of capital goods and the timing of product dutiability. The decision highlighted the significance of factual verification and adherence to Cenvat Credit Rules in determining the eligibility for Cenvat credit on capital goods.