Cenvat credit on imported machinery: first 50% credit was allowable without the subsequent-year use condition.

Rule 4(2)(a) read with Rule 3(5) of the Cenvat Credit Rules, 2001 permitted the first 50% of credit on duty paid on imported machinery without requiring continued possession and use in the subsequent year. That condition applied only to the remaining 50% balance credit. As only the initial 50% credit was claimed, disallowance was not justified and the credit claim was allowed.

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Issues: Whether the appellant was entitled to avail 50% Cenvat credit on the duty paid on imported goods under the Cenvat Credit Rules, 2001.

Analysis: The appellant's entitlement was examined with reference to Rule 4(2)(a) read with Rule 3(5) of the Cenvat Credit Rules, 2001. The condition relating to possession and use of the machinery in the subsequent year was held to apply only to the remaining 50% balance credit and not to the first 50% credit. Since only the initial 50% credit had been claimed, the rejection of credit was not justified.

Conclusion: The appellant was entitled to avail the first 50% credit and the disallowance of credit was unsustainable, in favour of the assessee.

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