Cenvat credit on capital goods may be fully claimed later when none was availed in the first year.

Rule 4(2) of the Cenvat Credit Rules, 2002 permits only up to 50% credit on capital goods in the first financial year, but it does not require an assessee to take that amount. The balance credit may be carried forward and taken in the subsequent financial year without any separate ceiling on the quantum of such balance. Where capital goods were not put to use in the first year and no credit was availed then, the entire unavailed amount remained available in the next year as balance credit.

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Issues: Whether the assessee was entitled to avail the entire balance Cenvat credit on capital goods in the second financial year when no credit had been taken in the first financial year under Rule 4(2) of the Cenvat Credit Rules, 2002.

Analysis: Rule 4(2)(a) restricts credit in the first financial year to not more than 50% of the duty paid on capital goods, but it does not compel availment of that maximum amount. Rule 4(2)(b) permits the balance credit to be taken in the subsequent financial year and does not impose any ceiling on the quantum of such balance credit. Since the capital goods could not be put to use in the first financial year and no credit was utilised during that year, the entire unavailed amount remained available as balance credit in the next year.

Conclusion: The assessee was entitled to avail the entire credit of duty paid on the capital goods in the second financial year.

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