Cenvat credit on capital goods can include balance credit in the next financial year when 50% was already taken.

Rule 4(2)(a) of the Cenvat Credit Rules, 2002 allows credit on capital goods where the duty has been paid, and does not bar a taxpayer from taking the balance 50% credit in the succeeding financial year if 50% was already availed in the year of clearance. On the stated facts, the appellant had taken 50% credit in 2003-04 and the capital goods were cleared in the same financial year, so the later availment of the remaining credit could not be denied. The denial of the balance Cenvat credit was therefore unsustainable, and the credit was allowable to the assessee.

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Issues: Whether the appellant was entitled to avail the remaining 50% Cenvat credit on capital goods in the subsequent financial year after having taken and effectively reversed the duty element in the same financial year of clearance.

Analysis: Rule 4(2)(a) of the Cenvat Credit Rules, 2002 permits Cenvat credit on capital goods to the extent of the whole duty paid where the capital goods are cleared in the same financial year. The record showed that the appellant had availed 50% credit during 2003-04 and had cleared the capital goods in the same financial year. The balance 50% credit was not taken in that year but in the succeeding financial year. On these facts, there was no basis to deny the subsequent availment of the remaining credit, as the rule did not bar taking the balance credit in the next financial year in these circumstances.

Conclusion: The denial of the remaining 50% Cenvat credit was unsustainable and the credit was allowable in favour of the assessee.

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