Tribunal allows Cenvat credit on capital goods transfer, emphasizes Rule 4(2)

The Tribunal allowed the appeal, setting aside the decision disallowing the appellant's Cenvat credit on capital goods. The appellant purchased the goods, which were received in their factory, and later transferred them to an associate after paying excise duty. The Tribunal held that the appellant could avail the credit as per Rule 4(2) of the Cenvat Credit Rules, emphasizing the proviso for credit on duty paid goods cleared in the same year. The Tribunal ruled that the appellant's failure to take credit earlier did not bar them as long as the receipt of goods in the factory was confirmed.

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Issues:
- Availment of Cenvat credit on capital goods without possession
- Interpretation of Rule 4 of Cenvat Credit Rules, 2004

Analysis:
1. Availment of Cenvat credit on capital goods without possession:
The appellant, a manufacturer of Cast Articles of Iron, purchased a "Shell Core Shooter Machine" on 18.02.2008 and paid excise duty on it. However, they did not avail the Cenvat credit on the capital goods even after receiving them inside the factory in the financial year 2007-08. Later, the machine was transferred to their associate concern, and excise duty was paid on it through invoices dated 18.05.2009 and 13.01.2010. The appellant then availed Cenvat credit on the capital goods on 22.08.2009. The issue arose when the credit taken by the appellant was disallowed on the grounds that they were not in possession of the capital goods at the time of availing the credit, and the goods were not used in or in relation to the manufacture of final products. The Commissioner (Appeals) upheld this decision, leading the appellant to appeal to the Tribunal.

2. Interpretation of Rule 4 of Cenvat Credit Rules, 2004:
The appellant argued that as per Rule 4 of Cenvat Credit Rules, 2004, a manufacturer can take a maximum of 50% credit in the year of purchase and the balance in subsequent financial years. They contended that there is no provision debarring them from taking the entire credit in subsequent years if they fail to take 50% credit in the year of purchase. The appellant claimed that they were in possession of the capital goods during the relevant financial years and cited the findings of the Ld. Commissioner (Appeals) and a previous Tribunal decision as supporting evidence. On the other hand, the department argued that the appellant was not eligible to avail the credit as they did not have possession of the capital goods at the time of availing the credit, contrary to the provisions of the Cenvat Credit Rules.

3. Judgment:
After hearing both sides and examining the records, the Tribunal found that the appellant had indeed purchased the capital goods, which were received in their factory on 18.02.2008. The appellant did not avail the Cenvat credit on the goods for the relevant financial years but later transferred the goods to their associate concern after paying excise duty. The Tribunal noted that the appellant availed the Cenvat credit on 22.08.2009, after the goods were cleared on 18.05.2009. Referring to Rule 4(2) of Cenvat Credit Rules, the Tribunal emphasized the proviso allowing credit for the whole duty paid on capital goods in the same financial year if the goods are cleared in the same year. The Tribunal also relied on a previous Tribunal decision to support its ruling that the appellant could not be debarred from taking credit as long as the receipt of capital goods in the factory was not disputed, and the failure to take credit earlier was proven. Therefore, the impugned order disallowing the credit was set aside, and the appeal was allowed.

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