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TMI BlogLIMITAION PERIOD OF CENVAT CREDIT ON IMPORTED CAPITAL GOODSX X X X Extracts X X X X X X X X Extracts X X X X ..... Dear Sir Please help me out to resolve the issue- that i had bought machineries in year 2011 for production in my works, but failed to claim input in same and next year, but 50% claimed in year 2014-15 and balance in 2015-16, will it be allowed or not. Please suggest - Reply By Rajagopalan Ranganathan - The Reply = Sir, As per the Cenvat Credit Rules, 2014 . credit of duty paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on capital goods can be taken @50% of duty paid in the first year of purchase (in your case 2011-12). the remaining 50% can be take in any of the remaining years. If you did not take the first half in the first year of purchase, then you can take 100% credit in the second or subsequent years. Therefore you could have taken 100% credit in the year 2014-15. However, the credit taken by you is correc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. - Reply By KASTURI SETHI - The Reply = Dear Querist, During the Central Excise era, there was no time limit applicable for taking Cenvat Credit on Capital Goods. Rule 4(1) of Cenvat Credit Rules, 2004 (as amended from time to time up to 30.6.17) imposes restriction of time limit on taking credit relating to inputs and Rule 4(7) imposes restriction of time limit on taking credit to i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nput services. Go through Rule 4(2)(a) of Cenvat Credit Rules, 2004 which is extracted below:- Rule 4(2)(a) : The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service [or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory, [or in the premises of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be]] at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year : Provided that the CENVAT credit in respect of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year : Rule 4 (2)(b) says (b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e premises of the provider of output service, Hence it is NOT that Cenvat Credit on capital goods must be taken in the first year. An assessee can opt to take credit on capital goods in any subsequent financial year, as even if the assessee takes NIL credit in the first year, that person conforms to the condition or requirement/parameter of Rule (2)(a) , inasmuch as it is crystal clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'NIL' does not exceed 50%. Board vide its letter DOF No.334/15/2014-TRU dated 10.7.14 has also confirmed. - Reply By Ganeshan Kalyani - The Reply = I agree with the Experts comment. The Cenvat Credit on the Capital Goods was allowed to be taken to the extend of 50% in the first year of purcahse of such goods and balance credit was allowed to be taken in the next year. If by any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason the credit was missed to be taken in the first year then in the following year full credit can be taken. - Reply By KASTURI SETHI - The Reply = Relevant extract of Case law in support of above replies : 2019(12) TMI-939-CESTAT Ahemdabad Sumangal Glass Industries Pvt. Ltd. Vs. CCE Ahmedabad 10. As regards the another reason for denial by the Adjudicating Authority that appella ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt have taken 100% credit instead of 50%, we find that the year of receipt of capital goods is 2005-06, whereas the credit was taken in October 2007. As per Rule 4(4), it is clear provision that part of taking 50% credit is applicable only if Cenvat credit is availed in the year of receipt of capital goods. As per proviso to sub-rule, the assessee is entitled for the credit of remaining 50% in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent Financial Years. That means, in the subsequent year of receipt of capital goods, the appellant is entitled for 100% Cenvat credit. Therefore, on this ground, the denial of Cenvat credit is not correct and legal. This issue has been considered elaborately by CESTAT Bangalore in the case of Progressive Systems (supra) and as per the facts of the said case, the entire credit was availed i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 2007-08, the year following receipt of goods, it was held that in terms of Rule 4(2) of Cenvat Credit Rules, 2004, assessee can avail credit upto 50% in the year of receipt of goods and balance in the subsequent Financial Years. There is no prescription that credit of any extent to be availed in the year of receipt of capital goods. Accordingly, the Tribunal held that availment is not inconsiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce with legal provisions and the appeal was allowed. This very decision of the Tribunal was challenged by the Revenue before the Hon ble Karnataka High Court (supra) and the Division Bench of the Hon ble Court maintained the Tribunal order and dismissed the Revenue s appeal. In view of this settled position by the Hon ble Karnataka High Court, availment of Cenvat credit by the appellant to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xtent of 100% in the subsequent year of receipt is absolutely legal and correct. - LIMITAION PERIOD OF CENVAT CREDIT ON IMPORTED CAPITAL GOODS - Query Started By: - BALRAJSINGH VIRDI Dated:- 27-3-2020 Central Excise - Got 4 Replies - Central Excise - Discussion Forum - Knowledge Sharing, reply post by an expert, personal opinion Tax Management India - taxmanagementindia - taxmanagement - ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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