2010 (3) TMI 391 - AT - Central Excise

Cenvat/Modvat- A show cause notice was issued to the Appellant for recovery of the Cenvat credit of Rs. 3,54,232/- alongwith interest and also imposition of penalty. The Asstt. Commissioner denied the capital goods Cenvat credit on the grounds that -(a) the capital goods were received in the factory during July 03 - June 04 period when Cenvat Credit Rules, 2002 (CCR, 2002) were in force but since the Appellant were not registered with Central Excise at that time, they were not eligible for Cenvat credit; and (b) when the appellant were not eligible for 1st instalment of capital goods Cenvat credit, the question of taking Cenvat credit of the balance amount does not arise. Held that- manufacture manufacturing excisable goods but exempt from registration formalities under Rule 9(1) for the reason that he is availing SSI exemption and the value of his clearances during the financial are within the full exemption limit, does not cease to be a manufacturer of excisable goods and therefore, capital goods Cenvat credit in terms of the provisions of Rule 3(1) read with Rule 4 of CCR, 2002 could not be denied to him for this reason. In view of the above discussion, the impugned order is not correct. The same is set aside. The appeal is allowed with consequential relief.

Summary

Issues:
1. Denial of capital goods Cenvat credit under Cenvat Credit Rules, 2004.
2. Eligibility for Cenvat credit under CCR, 2002 for capital goods received during July'03 - June'04 period.
3. Interpretation of rules regarding Cenvat credit eligibility in relation to central excise registration.

Analysis:
1. The Appellant, a manufacturer of Herbal Cosmetics, sought Cenvat credit for capital goods purchased during July'03 - June'04 period. A show cause notice was issued for recovery of the credit along with penalties under Cenvat Credit Rules, 2004. The Asstt. Commissioner confirmed the demand, denying the credit based on the Appellant's lack of registration during the relevant period. The Commissioner of Central Excise (Appeals) upheld this decision, leading to the current appeal.

2. The Appellant argued that they were eligible for Cenvat credit under CCR, 2002 for the capital goods received, as they were availing SSI exemption and had not obtained central excise registration due to full duty exemption under Notification No. 8/03-C.E. They contended that the denial of credit was incorrect. The Respondent defended the decision, citing a Larger Bench's judgment and emphasizing the dutiability of the final product at the time of capital goods receipt.

3. The Tribunal analyzed the case, noting that the Appellant's goods were excisable, and the capital goods were intended for use in manufacturing final products. The rules for Cenvat credit under CCR, 2002 were satisfied, allowing for the credit to be taken in 2005-06. The Tribunal clarified that the lack of central excise registration prior to 10-9-04 did not negate the Appellant's eligibility for credit. The Appellant's exemption from registration under SSI notification did not disqualify them from Cenvat credit under CCR, 2002. Therefore, the denial of credit was deemed incorrect, and the appeal was allowed with consequential relief.

This detailed analysis highlights the issues of denial of Cenvat credit, eligibility under CCR, 2002, and the interpretation of rules concerning central excise registration in the context of the legal judgment.