CENVAT credit on capital goods arises on factory receipt, while excess refund under exemption can still be recovered.

CENVAT credit on capital goods was treated as accruing on receipt of the goods in the factory, so later assembly and installation did not defer eligibility. On that basis, delayed availment could not shift the point at which credit should have been taken. The article also notes that refund claimed in excess of entitlement under the exemption notification was recoverable where the refund did not fully disclose the non-availment of credit, but the later availed credit itself could not be recovered because the underlying entitlement remained valid. The result described is partial relief, with excess refund recovery sustained and the credit-related demand quashed.

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Issues: (i) whether CENVAT credit on capital goods had to be availed in the year of receipt of the goods in the factory or could be deferred until later assembly and installation; (ii) whether recovery of refund claimed in excess of entitlement under the exemption notification was sustainable.

Issue (i): whether CENVAT credit on capital goods had to be availed in the year of receipt of the goods in the factory or could be deferred until later assembly and installation.

Analysis: The goods were received in the factory on a long-term basis and credit was taken only later after assembly on the same invoices. On that factual basis, the eligibility to credit arose when the capital goods were delivered and received in the factory. The relevant CENVAT scheme treated receipt in the factory as the material point for availment of credit, and the later stage of usage within the factory did not postpone that eligibility.

Conclusion: The credit ought to have been availed in 2007-2008 and 2008-2009, and the delayed availment could not defeat the finding that the entitlement arose earlier.

Issue (ii): whether recovery of refund claimed in excess of entitlement under the exemption notification was sustainable.

Analysis: Since the refund was claimed during the years in which the credit ought already to have been taken, the amount refunded was in excess of entitlement. The plea that the jurisdictional authority was aware of the facts did not avail the assessee because the refund claim did not disclose the non-availment of credit in an open and complete manner. At the same time, the later availment of CENVAT credit, in the absence of any legal basis to deny that entitlement, could not be recovered.

Conclusion: Recovery of the excess refund was upheld, while the demand relating to the subsequently availed CENVAT credit was set aside.

Final Conclusion: The appeal succeeded only in part, with the refund recovery sustained but the credit-related demand quashed.

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