Cenvat credit on capital goods can be availed in a later year when the rule permits balance credit.

Rule 4(2)(a) of the Cenvat Credit Rules, 2002 allowed only 50% of capital goods credit in the year of receipt, while Rule 4(2)(b) permitted the balance to be taken in a subsequent financial year. The assessee had not claimed the initial 50% in the year of receipt but availed the full credit later. The rule contained no express prohibition against taking the remaining credit in the later year, so the balance Cenvat credit could not be denied merely because it was not claimed earlier. On that basis, denial of credit, penalty, interest, and confiscation was not sustainable.

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Issues: Whether the assessee was entitled to avail 100% Cenvat credit on capital goods in the subsequent financial year when the remaining credit was not taken in the year of receipt.

Analysis: Rule 4(2)(a) of the Cenvat Credit Rules, 2002 permits availment of only 50% of the credit in the financial year in which the capital goods are received, while Rule 4(2)(b) permits the balance credit to be availed in any subsequent financial year. The assessee had not claimed the first 50% in the initial year and availed the full credit in the next year. The rule did not contain any express prohibition against taking the balance credit in the subsequent year, and the earlier view supporting availment of the remaining credit was applicable.

Conclusion: The assessee was entitled to avail the credit in the subsequent financial year, and the denial of credit, penalty, interest, and confiscation could not be sustained.

Ratio Decidendi: Where the governing credit rule permits balance credit on capital goods to be taken in a subsequent financial year and does not expressly restrict the total availment in that year, the remaining Cenvat credit cannot be denied merely because it was not claimed in the year of receipt.

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