Tribunal allows Cenvat Credit on late-installed capital goods for exempt products

The Tribunal ruled in favor of the appellant, allowing the Cenvat Credit on capital goods used for products exempt under specific notifications, despite installation after the products became exempt. The judgment emphasized determining credit eligibility at the time of receiving capital goods, as established by previous tribunal and Supreme Court rulings.

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Issues:
1. Whether Cenvat Credit on capital goods is allowable only after production commences, on the day goods are installed, or on the day goods are received for intended production of dutiable final products.
2. Whether Cenvat Credit lawfully taken on receipt of capital goods can be denied when final product becomes exempted.

Analysis:
1. The appellant, engaged in manufacturing biscuits, received new plant and machinery for installation in 2007. Revenue observed phased receipt of capital goods, with final consignment arriving after biscuits became non-taxable under a notification. The appellant availed Cenvat Credit on these goods. Revenue alleged the capital goods were used exclusively for exempted products, disallowing the Cenvat Credit of Rs. 17,97,968. The Additional Commissioner upheld the demand, imposing penalties. The Commissioner (Appeals) remanded the issue, leading to a fresh order reconfirming the demand. However, the Commissioner (Appeals) allowed the appeal, holding that Cenvat Credit was rightly taken when goods were received, irrespective of subsequent exemption. The Commissioner relied on tribunal rulings emphasizing credit eligibility at the time of receiving capital goods.

2. The Revenue challenged the order, contending that as the installed capital goods were used exclusively for exempted goods, Cenvat Credit was inadmissible under Rule 6(4) of CCR, 2004. The Rule prohibits credit on capital goods used for exempted final products. The Revenue argued that since the new plant was installed after biscuits became exempt, the credit was not admissible. However, the Tribunal found that Cenvat Credit eligibility is determined at the time of receiving capital goods, as supported by tribunal and Supreme Court rulings. Rule 6(4) allows credit on capital goods used for products normally taxable but exempt under specific notifications, as in the appellant's case. The Tribunal held that the appellant rightfully availed and utilized the Cenvat Credit, allowing the appeal and dismissing the Revenue's appeal.

In conclusion, the Tribunal ruled in favor of the appellant, allowing the Cenvat Credit on capital goods used for products exempt under specific notifications, despite installation after the products became exempt. The judgment emphasized the importance of determining credit eligibility at the time of receiving capital goods, as established by previous tribunal and Supreme Court rulings.

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