2017 (4) TMI 1079 - AT - Central Excise

Successful appeal grants cenvat credit on capital goods for manufacturing both dutiable and exempted products.

Malwa Industries Ltd. Versus CCE, Ludhiana

The appellant successfully appealed against the denial of cenvat credit on capital goods under an exemption notification. The Member (Judicial) found that ... CENVAT credit - capital goods - appellant has reversed the cenvat credit on inputs which have gone in the manufacturing of final products under exemption N/N. 30/04-CE dated 9.7.2004 - Held that: - in the case of S.T. Cottex Exports Pvt. Ltd. [2010 (1) TMI 1048 - CESTAT NEW DELHI], the facts were similar to the facts of this case in hand wherein this Tribunal has held that the cenvat credit on capital goods is available to the assessee - appeal allowed - decided in favor of appellant. Issues:Appeal against denial of cenvat credit on capital goods under exemption notification.Analysis:The appellant appealed against the denial of cenvat credit on capital goods procured during April to May 2006. The appellant availed the credit but was later asked to reverse it as they had cleared exempted goods. The Revenue contended that since the appellant cleared goods under an exemption notification, they should reverse the credit on capital goods as well. Consequently, duty demand was confirmed along with interest and a penalty of Rs. 50,000. The appellant argued that they were engaged in manufacturing both dutiable and exempted final products, justifying their credit on capital goods. They cited a Tribunal decision affirmed by the High Court to support their claim.The learned AR argued that during the reversal of credit on inputs, the appellant failed to reverse the credit on capital goods. Referring to a previous Tribunal decision, the AR contended that the appellant was not entitled to the credit on capital goods as the final products were exempted at the time of procurement. However, the Member (Judicial) found that the facts in the current case differed from the precedent cited by the AR. In the present case, the final products were dutiable at the time of procurement of capital goods and were cleared on payment of duty. The Member (Judicial) noted that a previous Tribunal decision and a High Court ruling supported the appellant's right to avail cenvat credit on capital goods in a similar situation.After hearing both parties and reviewing the submissions, the Member (Judicial) concluded that the appellant had correctly availed the cenvat credit on capital goods. The impugned order was deemed to lack merit, and the appeal filed by the appellant was allowed. The Member (Judicial) set aside the order, ruling in favor of the appellant.