Cenvat credit on capital goods was allowed before actual use where installation was in progress and goods were available for production.

Under Rule 4(2)(b) of the Cenvat Credit Rules, balance credit on capital goods was available even though the goods had not yet been put to actual use, because they were received in the factory, under installation and erection, and treated as being in the manufacturer's possession and use in the sense of availability for production. On those facts, the Tribunal's interpretation was accepted, no substantial question of law arose, and the Revenue's challenge failed. The assessee was entitled to the balance credit; the appeal was dismissed and the cross-objection stood disposed of.

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Issues: Whether the assessee was entitled to avail the balance Cenvat credit on capital goods under Rule 4(2)(b) of the Cenvat Credit Rules when the goods had been received and were under installation and erection, though not yet put to actual use.

Analysis: Rule 4(2)(b) permitted the balance credit in a subsequent financial year if the capital goods were in the possession and use of the manufacturer of final products. The Tribunal construed the words "possession and use" together to mean availability for use in manufacture. On the facts found, the capital goods were lying in the factory for installation and the process of erection was in progress. In that factual setting, the requirement of possession and use was treated as satisfied, and no substantial question of law arose.

Conclusion: The assessee was entitled to the balance credit and the Revenue's challenge failed.

Final Conclusion: The appeal was dismissed and the cross-objection, not pressed, stood disposed of.

Ratio Decidendi: For Rule 4(2)(b), capital goods need not be actually operational if they are in the factory, available for installation, and under the manufacturer's possession and use in the sense of being available for use in production.

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