Appellant allowed CENVAT credit for shot blasting machine integral to block making plant.

The appellant, a partnership concern manufacturing pavers and blocks, imported a composite block making plant and claimed CENVAT credit for the shot blasting machine used in finishing exempted pavers. The Revenue disputed the credit, but the Tribunal ruled in favor of the appellant, considering the machine integral to the plant and following a precedent allowing credit for capital goods used for both exempted and dutiable goods. The appellant's refund claim was granted, subject to interest payment for the disputed period. The Tribunal did not address the production commencement date issue but allowed the appeal with interest deduction as per Supreme Court precedent.

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Issues:
1. Eligibility of CENVAT credit for shot blasting machine used in manufacturing exempted goods.
2. Treatment of shot blasting machine as part of composite block making plant.
3. Claim of refund for CENVAT credit reversal.

Issue 1: The appellant, a partnership concern manufacturing pavers, solid building blocks, and hollow blocks, imported a composite block making plant in March 2008 and took CENVAT credit for additional customs duty paid in September 2008. However, the Revenue contended that the appellant was not eligible for CENVAT credit for the shot blasting machine, which was part of the block making plant used exclusively for finishing the pavers exempt from duty. The appellant reversed the credit but later filed a refund claim, arguing that the shot blasting machine was integral to the composite plant and they were paying duty on pavers from March 2009. The lower authorities rejected the contention and the refund claim.

Issue 2: The question arose whether the shot blasting machine could be considered part of the block making plant or as a separate machine. The appellant argued that the machine was essential for finishing pavers and was exclusively used for that purpose. The Tribunal considered the definition of exempt goods under the CENVAT Credit Rules 2004 and referred to a Gujarat High Court case where it was held that if capital goods were used for both exempted and dutiable goods, credit could not be denied solely based on availing conditional exemption. The Tribunal noted that the appellant started paying duty on pavers from March 2009, and following the Gujarat High Court decision, ruled in favor of the appellant, subject to payment of interest for the period from September 2008 to March 2009.

Issue 3: The appellant also claimed they had not commenced commercial production until March 2009, and the lower authorities did not consider this aspect. The Tribunal did not delve into this claim due to lack of verification by the lower authorities and the favorable decision based on the Gujarat High Court ruling. The appeal was allowed with the condition that the refund would be granted after deducting the interest payable for the specified period, as per the Supreme Court's decision that interest is payable even if the credit has not been utilized.

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