CENVAT credit on capital goods available during erection and installation in factory before commissioning.

Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits the balance CENVAT credit on capital goods to be taken in a subsequent financial year where the goods are in the manufacturer's possession and use. The article states that this condition is not limited to actual commercial operation, and capital goods kept in the factory for erection and installation may qualify even before commissioning. Applying the earlier Larger Bench view as approved by the High Court, the assessee was entitled to the balance 50% credit, and denial of the credit was unsustainable.

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Issues: Whether the assessee was entitled to take the balance 50% of CENVAT credit on capital goods in the subsequent financial year when the capital goods were received in the factory but the plant was still under erection and installation.

Analysis: Rule 4(2)(b) of the Cenvat Credit Rules, 2002 permits the balance credit to be taken in a subsequent financial year if the capital goods are in the possession and use of the manufacturer of final products. The dispute turned on whether capital goods lying in the factory for installation and erection, but not yet commissioned, satisfied that condition. The decision followed the view that the expression 'possession and use' is not confined to actual commercial operation and that capital goods available in the factory for erection and installation can satisfy the rule. The earlier Larger Bench view, as approved by the High Court, was applied to the facts of the case.

Conclusion: The assessee was entitled to the balance 50% CENVAT credit, and denial of the credit was unsustainable.

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