Tribunal rules in favor of manufacturer on cenvat credit dispute

The Tribunal ruled in favor of the appellant, a manufacturer of automobile parts, in a case concerning the availment of cenvat credit on moulds treated as capital goods. The Central Excise Department had denied the cenvat benefit under Rule 3(5) of the Cenvat Credit Rules, 2004, due to the recovery of mould costs from customers. However, the Tribunal found that since the moulds were in possession of the appellant and not removed from the factory, Rule 3(5) did not apply. Emphasizing compliance with statutory provisions over ownership/control, the Tribunal set aside the denial of cenvat credit on moulds, ruling in favor of the appellant.

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Issues:
- Availment of cenvat credit on moulds treated as capital goods
- Denial of cenvat benefit under Rule 3(5) of the Cenvat Credit Rules, 2004
- Ownership/title transfer of moulds to buyers affecting cenvat credit eligibility

Analysis:
The appellant, engaged in manufacturing automobile parts, availed cenvat credit on Central Excise duty paid on moulds, treating them as capital goods. The Central Excise Department denied the cenvat benefit under Rule 3(5) of the Cenvat Credit Rules, 2004, upon discovering that the cost of moulds was recovered from customers. The appellant argued that since the moulds were installed in the factory and not removed, Rule 3(5) should not apply. The Department contended that ownership/title transfer of moulds to buyers rendered cenvat credit unavailable.

Upon review, the Tribunal noted that a Chartered Engineer certified the moulds were in possession of the appellant and in working condition within the factory. As the moulds were not removed, Rule 3(5) did not apply, which mandates payment of cenvat credit upon removal of availed inputs or capital goods from the factory. The Tribunal emphasized that ownership/control of capital goods is not decisive for cenvat credit eligibility; compliance with statutory provisions is key. Since the appellant fulfilled the Cenvat statute requirements, denial of cenvat credit on moulds was deemed unjustified.

Consequently, the Tribunal set aside the impugned order confirming the Cenvat demand under Rule 3(5) of the Cenvat Credit Rules, 2004, and allowed the appeal in favor of the appellant.

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