Cenvat credit on capital goods: prima facie liberal interpretation supported unconditional stay of recovery.

Rule 4(2)(a) of the Cenvat Rules was considered in relation to whether 50% of capital goods credit had to be availed within the financial year of receipt. The Department treated non-availment within that period as a basis to deny credit, while the applicant relied on the rule text, a Board circular and prior Tribunal authority supporting a liberal approach to availment of capital goods credit. On a prima facie reading, the Tribunal found a case for interim relief and granted unconditional stay of recovery.

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Issues: Whether, for purposes of waiver of pre-deposit, the denial of Cenvat credit on capital goods was justified on the ground that 50% credit was not availed within the financial year under Rule 4(2)(a) of the Cenvat Rules.

Analysis: The Department proceeded on the basis that the rule required availing at least 50% credit within the financial year in which the capital goods were received. The applicant relied on the text of the rule, the Board circular clarifying that credit on capital goods may not always be possible within the prescribed period, and earlier Tribunal authority taking a liberal view on availment of credit on capital goods. On a prima facie consideration of the rule and the materials placed, the order records that the applicant had shown a case for interim relief.

Conclusion: A prima facie case was found in favour of the appellant and unconditional stay of recovery was granted.

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