Cenvat credit on capital goods may be taken later when goods are received in factory and installation is underway.

Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits availment of the balance 50% Cenvat credit on capital goods in a subsequent financial year where the goods are received in the factory and installation or erection is in progress. The expression "possession and use" was read to cover capital goods available for use in manufacture, not only goods already put to actual use. On that basis, capital goods lying in the factory under erection were treated as satisfying the statutory condition, and credit could be taken in the later year without waiting for completed operational use.

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Issues: Whether the balance 50% of Cenvat credit on capital goods could be availed in a subsequent financial year when the capital goods were lying in the factory for installation and erection was in progress.

Analysis: Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits the balance credit in a subsequent year if the capital goods are in the possession and use of the manufacturer. The expression "possession and use" was read together to mean availability for use in the manufacture of final products. Where the capital goods had been received in the factory and were under installation with the erection process being carried out, the statutory condition was treated as satisfied. The prior view denying credit solely because the goods had not yet been actually put to use was not accepted on these facts.

Conclusion: The assessee was entitled to avail the balance 50% of Cenvat credit in the subsequent financial year when the capital goods were in the factory for installation and erection was underway.

Ratio Decidendi: For purposes of Rule 4(2)(b) of the Cenvat Credit Rules, 2002, capital goods lying in the factory for installation and under erection are treated as being in the possession and use of the manufacturer, enabling availment of the balance credit in a subsequent financial year.

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