Balance Cenvat credit on capital goods remains available in a later year if the goods stay in possession and use.

Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits balance credit on capital goods to be taken in a later financial year, provided the capital goods remain in the manufacturer's possession and use in that year. The rule does not require possession at the precise moment the credit entry is taken. Where the assessee received the capital goods, claimed the admissible initial credit, retained and used the goods in the subsequent year, and paid duty on their removal, denial of the remaining credit was not justified. The balance Cenvat credit was therefore allowable and the credit denial was unsustainable.

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Issues: Whether the assessee was entitled to avail the balance Cenvat credit on capital goods in a subsequent financial year after removal of the capital goods on payment of duty.

Analysis: Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits the balance of Cenvat credit on capital goods to be taken in a financial year subsequent to the year of receipt, provided the capital goods are in the possession and use of the manufacturer in that subsequent year. The rule does not require that the goods must be in possession at the exact time the credit is taken. The assessee had received the capital goods, availed the eligible initial credit, retained and used the goods in the relevant subsequent year, and paid duty on removal of the capital goods. On that basis, denial of the balance credit was not justified.

Conclusion: The assessee was entitled to avail the balance Cenvat credit and the denial of credit was unsustainable.

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