Capital goods Cenvat credit remains available despite SSI exemption and temporary surrender of registration during continuing manufacturing activity

A manufacturer does not lose entitlement to capital goods Cenvat credit merely because it availed SSI exemption, surrendered registration, and later re-registered after the exemption position changed. The operative principle is that SSI exemption and relief from registration formalities do not alter the status of the unit as a manufacturer of excisable goods, and credit earned on duty-paid capital goods remains available if manufacturing activity continues and the Cenvat conditions are otherwise met. On that basis, the credit could not be denied solely for the intervening exemption period and registration change.

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Issues: Whether Cenvat credit on capital goods could be denied to a manufacturer who had availed SSI exemption, surrendered registration, and later re-registered after withdrawal of the enhanced exemption.

Analysis: Availing SSI exemption and being exempt from registration formalities did not cease the respondent's status as a manufacturer of excisable goods. The capital goods credit had been earned in relation to duty-paid capital goods and the respondent had continued manufacturing activity throughout. In these circumstances, the credit could not be denied merely because registration had been surrendered during the period of exemption. The Tribunal's view that credit under the relevant Cenvat Credit Rules was admissible was found acceptable.

Conclusion: The issue was decided in favour of the assessee, and the credit could not be denied on the ground of SSI exemption and surrender of registration.

Final Conclusion: The appeal failed because the respondent was entitled to retain and utilize the capital goods credit notwithstanding the interim SSI exemption and change in registration status.

Ratio Decidendi: A manufacturer does not lose entitlement to capital goods Cenvat credit merely by availing SSI exemption or by being exempted from registration formalities, so long as the manufacturer continues to manufacture excisable goods and the credit otherwise satisfies the Cenvat rules.

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