2020 (1) TMI 487 - AT - Central Excise

Disallowance of Cenvat credit pre-installation; eligibility post-installation date; interest payable pre-eligibility

The Tribunal found that the balance 50% Cenvat credit taken before the use of capital goods was not admissible under the rules at the time. However, the ... CENVAT Credit - admissibility of balance 50% Cenvat credit on capital goods, in terms of Rule 57 AC (2) of the erstwhile Central Excise Rules, 1944 read with Rule 4 of the Cenvat Credit Rules, 2002 - period 2000-01 to 2003-04 - CBEC Circular No.267/26/2006-CX. dated 28.06.2006 - HELD THAT:- Reliance placed in the case of M/S INDIAN OIL CORPORATION LTD. VERSUS THE COMMISSIONER OF CENTRAL EXCISE [2013 (9) TMI 419 - PATNA HIGH COURT] where the decision was rendered by the Hon’ble Patna High Court in the context of Rule 4(2)(b) of the Cenvat Credit Rules, 2002, which was effective till 09.09.2004 and the ratio of the said decision applies to the facts of the present case. Therefore, the balance 50% credit taken by the appellant before use of the capital goods, is not admissible. The capital goods were subsequently installed/put to use, the fact of which has also been acknowledged by the learned adjudicating authority in the impugned order. We also take note of the provisions of Rule 4(2)(b) of the Cenvat Credit Rules, 2004 (effective from 10.09.2004), in terms of which the condition of “use” was omitted - there is no time limit is stipulated under the Cenvat Scheme, for taking credit on capital goods, since as per the scheme, the balance credit can be deferred by an assessee to be taken in any financial year or years, subsequent to the financial year in which the capital goods were received. The appellant would be eligible for the credit on 10.09.2004. The appellant, however, would be liable to pay interest, in respect of the period i.e. from the date of taking the credit till 09.09.2004, as per the provisions of law, as applicable - appeal disposed off. Issues involved: Admissibility of balance 50% Cenvat credit on capital goods under Rule 57 AC (2) of the erstwhile Central Excise Rules, 1944 read with Rule 4 of the Cenvat Credit Rules, 2002.Detailed Analysis:1. Issue of Admissibility of Cenvat Credit:The dispute revolved around the admissibility of the balance 50% Cenvat credit on capital goods for the period 2000-01 to 2003-04. The appellant had availed the first 50% credit in the same financial year as the receipt of capital goods and the remaining 50% in subsequent years. The adjudicating authority disallowed the balance credit as it was taken before the actual installation or use of the capital goods, as required by the rules.2. Appeals and Tribunal Proceedings:The appellant filed appeals against the disallowance, seeking stay of recovery, which were initially dismissed due to lack of COD clearance as the appellant was a central PSU. After submitting the required clearances, the appeals were restored and eventually allowed by the Tribunal on merits. However, the Revenue challenged this decision before the High Court, leading to a remand back to the Tribunal for rehearing.3. Legal Arguments and Precedents:During the rehearing, the appellant argued that the capital goods had been installed and used, supported by installation certificates, making the credit admissible. They cited legal precedents such as judgments in cases involving Indian Oil Corporation Limited and Bharat Petroleum Corporation to bolster their position. On the other hand, the Revenue contended that credit taken before installation was not permissible, citing a judgment of the Patna High Court.4. Tribunal's Analysis and Decision:The Tribunal examined the submissions and the adjudicating authority's findings, noting that the credit was disallowed as it was taken before actual use of the capital goods. They referred to a CBEC Circular emphasizing the requirement of actual use for availing the balance credit. The Tribunal also considered the changes in the Cenvat Credit Rules, particularly Rule 4(2)(b) effective from 10.09.2004, which omitted the condition of 'use.'5. Conclusion and Judgment:Based on the analysis, the Tribunal found that the balance 50% credit taken before the use of capital goods was not admissible under the rules prevailing at the time. However, considering the subsequent installation and use of the goods, the appellant was eligible for credit from 10.09.2004 onwards. The Tribunal directed the appellant to pay interest for the period before this date. The appeals were disposed of accordingly, emphasizing the eligibility for credit post the specified date.This detailed analysis encapsulates the key legal issues, arguments, precedents, and the Tribunal's decision regarding the admissibility of Cenvat credit on capital goods in the mentioned judgment.