The Assessee is eligible to avail remaining 50% of Cenvat credit on Capital Goods which were cleared during the same Financial Year of its receipt

Dear Professional Colleague,

The Assessee is eligible to avail remaining 50% of Cenvat credit on Capital Goods which were cleared during the same Financial Year of its receipt

We are sharing with you an important judgment of Hon’ble CESTAT, Kolkata in the case of Nilkamal Ltd. Vs. CCE, Bolpur [2015 (1) TMI 588 - CESTAT KOLKATA]on following issue:

Issue:

Whether Assessee is eligible to avail remaining Cenvat credit on Capital Goods which were cleared during the same financial Year of its receipt?

Facts and background:

Nilkamal Ltd. (“the Appellant”) was engaged in the manufacture of excisable goods and for the manufacture of these goods, they had purchased some moulds as Capital Goods. Upon receipt of the said moulds in the factory, the Appellant availed 50% of the eligible Cenvat credit on the moulds as Capital Goods and the moulds were put to use for some time in the factory for further manufacturing of excisable goods. Thereafter, these modules were cleared to other units of the Appellant during the same Financial Year. Accordingly, the Appellant availed the remaining 50% of the Cenvat credit on the said moulds and cleared the said moulds, as such, by debiting the entire amount of Cenvat credit availed on such moulds.

The Department denied the availment of the remaining 50% of the Cenvat credit in the same Financial Year on the ground that once moulds were put to use, the same looses the character as such and their clearance from the factory after some time cannot be called ‘as such’, under Rule 4(2)(a) of the Cenvat Credit Rules, 2004 (“the Credit Rules”). Hence the Appellant was not eligible to avail remaining 50% of Cenvat credit at the time of its clearance in the same Financial Year.

Resultantly, a Show Cause Notice dated February 14, 2008 was issued to the Appellant alleging irregular availment of 50% Cenvat credit on moulds amounting to ₹ 3,01,95,614/-, which was further upheld by the Adjudication Authority confirming the demand of recovery of Cenvat credit along with interest and penalty. Being aggrieved the Appellant preferred an appeal before the Hon’ble CESTAT, Kolkata.

Held:

The Hon’ble CESTAT, Kolkata relying upon the following case laws:

• Modernova Plastyles Pvt. Ltd. [2008 (10) TMI 51 - CESTAT, MUMBAI]duly upheld by the Hon’ble Bombay High Court also vide its order dated November 4, 2009;
• CCE, Hyderabad-III Vs. Navodhaya Plastic Industries Ltd. [2013 (12) TMI 82 - CESTAT CHENNAI];
• CCE, Salem Vs. Rogini Mills Ltd. [2010 (10) TMI 424 - MADRAS HIGH COURT].

and held that the Capital Goods which were put to use and when cleared from the factory, would be eligible to the balance 50% of Cenvat credit available on such Capital Goods on its clearance from the factory in the same financial year.

Our Comments:

It will not be out of place to draw recent comment made by the Hon’ble Justice, Raghuram at FAPCCI, Hyderabad on January 17, 2015 that “Something is pathologically, terminally and seriously wrong with our departmental adjudication”.

Hope the information will assist you in your Professional endeavors. In case of any query/ information, please do not hesitate to write back to us.

Thanks and Best Regards,

Bimal Jain

FCA, FCS, LLB, B.Com (Hons)

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