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TMI Blog2018 (9) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. X X X X Extracts X X X X X X X X Extracts X X X X ..... s has proposed. Aggrieved by this order, the appellants preferred these appeals before this Bench. 4. The facts of the case are not in dispute; the appellant had taken CENVAT credit on the capital goods in Line 3 of the plant. Appellants had not used for manufacture of dutiable goods during the period 2004-2005 & 2005-2006 and that, the appellant had used Line 3 for manufacture of dutiable goods during 2006-2007 for total period of 19 days only. Learned Commissioner observed that the impugned capital goods were used exclusively for manufacture of exempted goods during the period relevant to the show cause notice and therefore, they are not entitled to the credit of the capital goods in terms of Rule 6(4) of the CENVAT Credit Rules, 2004. Thereafter, during the months of June, 2006 to July, 2006 and October, 2006 the machinery was used in manufacture of dutiable goods for a total period of 19 days only. The Learned Commissioner has relied on the case of Surya Roshni Ltd., [2003 (155) ELT 481 (Tri. - Del.)] in which, it was held that in respect of the capital goods used exclusively in manufacture of exempted products Modvat credit will not be admissible to the manufacturer. Subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany officials. It is not relevant that the capital goods were used in manufacture of exempted goods only at the time of receipt. He also argued that the demand is barred by limitation and penalty is not imposable on the appellant assessee as well as Shri P. Nagaraj. The Learned Counsel relied on the judgment of Hon'ble Tribunal in the case of Brindavan Beverages Pvt. Ltd., [2014 (310) ELT 398 (Tri. - Del.)] in which, it was held that the decisions of the Surya Roshni Limited (supra), relied upon by the Commissioner in this case is applicable only when the manufacturer had no plans or intention to use the capital goods for manufacture of dutiable goods. He also relied on the case of Pepsico India Holdings Ltd., [2005 (324) ELT 175 (Tri. - Mumbai)]. 6. Learned Commissioner (AR) vehemently opposed the appeal and asserted that the Line 3 was used exclusively for manufacture of exempted products during the period in dispute i.e. 2004-2005 and 2005-2006 in violation of Rule 6(4) of the CENVAT Credit Rules. Therefore, the credit on capital goods is liable to be recovered under Section 11A of the Central Excise Act. It is her assertion that the appellant had mentioned about the use of Li ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion and we have to follow the law as it is drafted. The next question to be decided is whether the entitlement of capital goods should be decided based on how they are used at the time of receipt of capital goods. In the case of Surya Roshni Ltd., (supra) at the time of receipt of the capital goods the initial products were exempted from the payment of duty. Thereafter, they became dutiable and the assessee wanted to claim credit of MODVAT on these goods. The Tribunal did not allow the capital goods credit and this decision was upheld by the Supreme Court. 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. This case is similar to the case of Brindavan Beverages Pvt. Ltd., [2014 (310) ELT 398 (Del.)] in which, the Tribunal held as follows in paragraphs 6, 7: "6. The undisputed fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny notification, where the exemption is granted based on the value or quantity or clearances made in a financial year. From a perusal of this sub-Rule, it is clear that capital goods Cenvat credit would be admissible when the capital goods are used either only for dutiable final product or for dutiable as well as exempted final product. The capital goods Cenvat credit is also admissible when a manufacturer is availing full duty exemption based on the value or quantity of the goods cleared in a financial year, in which case, while initially the manufacturer will be availing full duty exemption (for some months or for several financial years at a stretch) but subsequently at some point of time when he crosses the threshold limit for exemption, his final product becomes dutiable and in such a case, even during the period of full exemption, the manufacture can take capital goods Cenvat credit which he can utilize when this final product becomes dutiable. A question arises as to when capital goods are used for manufacture of dutiable as well as exempted final product, whether for availing capital goods credit, the dutiable as well as exempted final product have to be manufactured simult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the expression exclusively used "also includes intention to use" as provided under Rule 6(4) of the Cenvat Credit Rules. As the appellant had admittedly informed the Revenue at the time of commencement of production that it will utilize the said machinery installed for manufacture of both dutiable and non- dutiable products, it cannot be said that the said machinery is exclusively used for manufacture of the exempted goods. Capital goods in question have a life over several accounting years and as such the intention at the time of installation is also the relevant factor. For the temporary use for few months in manufacture of only exempted goods will not disable the assessee in availing the Cenvat credit and utilizing the same for manufacture of dutiable goods. It is also an admitted fact that the Cenvat credit so availed have been utilized only after Nov. 2005 whereas the production of dutiable goods started admittedly in June, 2005. Thus, I hold that the respondent- assessee is entitled to Cenvat credit on the capital goods in question. The appeal of the Revenue is dismissed. The respondent-assessee will be entitled to consequential relief, if any." 8. We respectfully follow t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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