Cenvat credit on capital goods can be taken later if goods are received and intended for use in manufacture.

Rule 4(2) of the Cenvat Credit Rules, 2002 was construed to permit availment of the balance 50% Cenvat credit in the subsequent financial year once capital goods had been received and were in the assessee's possession for use in manufacture. Actual installation before taking the credit was not treated as a condition precedent, because the requirement of possession and use was read together for eligibility. On that basis, the assessee was entitled to claim the balance credit in the relevant later year, and no interest or penalty was payable.

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Issues: Whether the assessee was entitled to avail the balance 50% Cenvat credit on receipt of capital goods in the subsequent financial year, even though actual installation and use occurred later.

Analysis: Rule 4(2) of the Cenvat Credit Rules, 2002 was construed in the light of the expression requiring the capital goods to be in the assessee's possession and use for the manufacture of final products. The disputed question was only the timing of availment of the balance credit. Since the capital goods had been received and were ultimately installed and used in the factory, actual installation before availing the credit was not insisted upon. The Tribunal followed the principle that possession and use must be read together for the purpose of eligibility to the balance credit.

Conclusion: The assessee was entitled to avail the balance 50% credit in the relevant subsequent financial year, and no interest or penalty was payable.

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