2025 (4) TMI 6 - HC - Central Excise

CENVAT credit on capital goods - to be determined based on the date of receipt of the capital goods or the date of commencement of production? - entitlement to avail CENVAT credit on capital goods used for manufacturing dutiable goods from the date the goods became dutiable - HELD THAT - On perusal of the finding of fact arrived at by the Tribunal it appears that the respondent assessee commenced its daily production of 600ML bottles on 29.03.2011 and before that in the months of January and February 2011 production of Maaza RGB was shown as goods produced which are not manufactured on the capital goods in question as the capital goods in the present case were meant for production of Maaza in PET bottles. The Tribunal has therefore rightly come to the conclusion on the basis of evidence produced on record by the respondent assessee that goods were manufactured on the capital goods meant for manufacture of Maaza PET bottles only from 29.03.2011 and on that date finished goods were admittedly dutiable as exemption earlier provided on such final products was done away. Admittedly the capital goods were utilised for the purpose of production of products of respondent assessee which were dutiable after 01.03.2011. There are no question of law much-less any substantial question of law arises from the impugned order of the Tribunal which requires any interference by this Court. Appeal dismissed.

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment are:

1. Whether the eligibility for CENVAT credit on capital goods should be determined based on the date of receipt of the capital goods or the date of commencement of production.

2. Whether the respondent assessee was entitled to avail CENVAT credit on capital goods used for manufacturing dutiable goods from the date the goods became dutiable.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Determination of Eligibility Date for CENVAT Credit

- Relevant Legal Framework and Precedents: The case hinges on the interpretation of Rule 6(4) of the CENVAT Credit Rules, 2004, which states that no CENVAT credit shall be provided on capital goods used exclusively for the manufacture of exempted goods.

- Court's Interpretation and Reasoning: The Tribunal interpreted Rule 6(4) to mean that the eligibility for CENVAT credit should be based on the date of commencement of production, not the date of receipt of capital goods. The reasoning was that the relevant date for determining the eligibility for credit is when the goods start being used for manufacturing dutiable goods.

- Key Evidence and Findings: The Tribunal found that the respondent commenced production of Maaza PET bottles on 29.03.2011, and from that date, the final products were dutiable. The records demonstrated that prior production was of Maaza RGB, which was not manufactured using the capital goods in question.

- Application of Law to Facts: The Tribunal applied Rule 6(4) to the facts and concluded that since the capital goods were used for manufacturing dutiable goods from 29.03.2011, the respondent was entitled to CENVAT credit from that date.

- Treatment of Competing Arguments: The revenue's argument that the eligibility should be based on the date of receipt of capital goods was rejected. The Tribunal held that the adjudicating authority's insistence on the date of receipt was incorrect, particularly since the revenue did not challenge the Tribunal's earlier view.

- Conclusions: The Tribunal concluded that the eligibility for CENVAT credit should be determined from the date of production commencement when the goods became dutiable.

Issue 2: Entitlement to CENVAT Credit on Dutiable Goods

- Relevant Legal Framework and Precedents: The determination of entitlement to CENVAT credit is guided by the CENVAT Credit Rules, particularly focusing on whether the capital goods were used for dutiable products.

- Court's Interpretation and Reasoning: The Tribunal reasoned that since the capital goods were used for manufacturing dutiable goods from 29.03.2011, the respondent was entitled to CENVAT credit. The exemption on the final product was removed effective 01.03.2011, making the goods dutiable.

- Key Evidence and Findings: The Tribunal noted that the production records showed the commencement of production of Maaza PET bottles on 29.03.2011. Prior production did not involve the capital goods in question, reinforcing the respondent's entitlement to credit from the date of dutiable production.

- Application of Law to Facts: The Tribunal applied the CENVAT Credit Rules to the factual scenario, confirming the respondent's entitlement to credit based on the use of capital goods for dutiable products from the specified date.

- Treatment of Competing Arguments: The Tribunal dismissed the relevance of judgments cited by the revenue, stating that they were not applicable to the facts of the present case.

- Conclusions: The Tribunal held that the respondent was legally entitled to CENVAT credit on the capital goods from the date they were used for manufacturing dutiable goods.

SIGNIFICANT HOLDINGS

- The Tribunal established the principle that the eligibility for CENVAT credit on capital goods should be determined based on the date of commencement of production of dutiable goods, rather than the date of receipt of capital goods.

- The Tribunal's final determination was that the respondent was entitled to CENVAT credit from 29.03.2011, the date when the capital goods were used for manufacturing dutiable goods, as the exemption on the final product was removed from 01.03.2011.

- The Court dismissed the appeal, concluding that no substantial question of law arose from the Tribunal's order, which required any interference by the High Court.

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