Strict construction of CENVAT credit rules barred deferred credit before capital goods were actually installed and used.

Deferred CENVAT credit on capital goods under Rule 4(2)(b) required two cumulative conditions in the relevant subsequent year: the manufacturer had to retain possession of the capital goods and the goods had to be in use for manufacture of final products. The court treated the phrase as clear and unambiguous, rejected any reading that would allow credit merely on anticipated future use, and applied strict construction of taxing provisions without importing extra conditions or diluting the statutory wording. Reliance on the earlier 1944 Rules and the departmental circular was found unpersuasive, and the remaining credit before actual installation and use was held not allowable.

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Issues: Whether the balance 50% of CENVAT credit on capital goods under Rule 4(2)(b) of the CENVAT Credit Rules, 2002 could be taken in a subsequent financial year before the capital goods were actually installed and used for manufacture, and whether the rule should be interpreted as requiring both possession and use in that subsequent year.

Analysis: The phrase "are in the possession and use of the manufacturer of final products in such subsequent years" was held to be clear and unambiguous. It was construed as laying down two cumulative conditions: the manufacturer must be in possession of the capital goods in the relevant subsequent year, and the capital goods must also be in use for manufacture of final products. The Court rejected the attempt to read the phrase as if it meant merely "possession for use" or to permit credit in anticipation of future use. Applying the settled rule that taxing statutes must be interpreted strictly and on the basis of the words actually used, the Court held that no additional condition could be imported to relax or expand the rule. The reliance on the earlier rule under the 1944 Rules was found inapposite, and the departmental circular cited did not support the assessee's construction.

Conclusion: The remaining 50% of CENVAT credit was not allowable before actual installation and use of the capital goods in the relevant subsequent year; the issue was decided against the assessee.

Final Conclusion: The appeal failed as the Tribunal's interpretation of the CENVAT credit rule was upheld and the demand of interest consequential to wrongful availment remained undisturbed.

Ratio Decidendi: For availing deferred CENVAT credit on capital goods, the statutory requirement of "possession and use" must be satisfied cumulatively, and courts cannot add to or dilute the condition by interpretation in a taxing provision.

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