2014 (8) TMI 14 - AT - Central Excise

Tribunal Grants Cenvat Credit for Manufacturing Setup without Registration

The Tribunal allowed the appeals, setting aside the orders denying the appellant Cenvat Credit. It held that the appellant was eligible for the credit as ... Eligibility to avail Cenvat Credit on capital goods and input services received prior to registration - registration not a precondition for entitlement to Cenvat Credit - credit for inputs and services consumed in setting up factory to reduce tax cascading - distinction between non-excisability of output at time of receipt and mere pre-registration receipt of capital goodsEligibility to avail Cenvat Credit on capital goods and input services received prior to registration - registration not a precondition for entitlement to Cenvat Credit - Assessee entitled to avail Cenvat Credit of duty on capital goods and service tax on input services received and consumed for setting up the manufacturing plant prior to obtaining central excise registration. - HELD THAT: - The Tribunal held that denial of Cenvat Credit solely because the assessee had not obtained central excise registration at the time of receipt of capital goods and input services was a misdirection. The admitted facts established that the capital goods and input services were received and utilised for erection, installation and commissioning of a plant set up to manufacture dutiable goods, and the assessee thereafter discharged the appropriate central excise duty on finished goods after obtaining registration. The adjudicating authority erred in treating registration under Rule 9 as a condition precedent to the existence of the status of manufacturer for purposes of claiming credit; such a technical bar frustrates the statutory scheme of avoiding cascading of taxes. The Tribunal applied the principle in the Hon'ble Karnataka High Court's decision in mPortal India Wireless Solutions Pvt. Ltd. v. CCE, Bangalore, which held that absence of registration is not a ground in law to refuse Cenvat credit where inputs/services were otherwise eligible. The Tribunal further distinguished the decision relied upon by Revenue (CCE, Surat v. Aneri Construction) on its factual matrix, noting that there the output was not a taxable service at the time of receipt, a factual circumstance not present in the present appeals. On these grounds the impugned orders denying credit were set aside.Impugned orders denying Cenvat Credit on the ground of non-registration are unsustainable and are set aside; the assessee is entitled to avail the credit.Final Conclusion: Appeals allowed; orders-in-original set aside and Cenvat Credit denial for pre-registration receipt of capital goods and input services quashed. Issues involved:Whether the appellant is eligible to avail Cenvat Credit of duty paid on capital goods and service tax on input services received before obtaining central excise registration.Analysis:Issue 1: Eligibility of Cenvat CreditThe appellant availed Cenvat Credit of central excise duty on capital goods and service tax on input services received before central excise registration. Revenue authorities contended in show cause notices that the appellant was ineligible for such credit. The adjudicating authority confirmed demands, citing Rule 9 of Central Excise Rules, 2002. The appellant argued that credit cannot be denied for goods consumed in setting up the factory, relying on a Karnataka High Court judgment. The Departmental Representative argued that credit eligibility depends on when the goods were received. The Tribunal found the appellant eligible for credit as the goods were used for manufacturing excisable products after setup. The adjudicating authority's denial based on registration was deemed incorrect, as it hindered the reduction of tax cascading effect.Issue 2: Legal PrecedentsThe Tribunal referenced a Karnataka High Court judgment involving Cenvat credit denial based on lack of registration, emphasizing that registration is not a prerequisite for credit eligibility. The judgment highlighted that denial of credit based on registration absence is not supported by law. The Tribunal found the Karnataka High Court judgment applicable to the present case, reinforcing the appellant's entitlement to credit.Issue 3: Comparison with Previous CaseThe Tribunal distinguished the present case from a previous case cited by the Departmental Representative, where goods were utilized for non-taxable services until a later taxable period. This distinction rendered the precedent inapplicable to the current scenario.Conclusion:The Tribunal concluded that the impugned orders were unsustainable and set them aside, allowing the appeals. The denial of Cenvat Credit to the appellant on technical registration grounds was deemed unjust, considering the goods were used for manufacturing excisable products post-setup. The judgment emphasized the importance of reducing tax cascading effects and upheld the appellant's right to avail Cenvat Credit for the duty paid on capital goods and service tax on input services consumed in setting up the manufacturing facilities.