Appeal granted for credit on capital goods under Cenvat Credit Rules, 2004

The Tribunal allowed the appeal, setting aside the order denying credit under Notification No.13/2016-CE. It held that the appellant, after opting out of area-based exemption, used capital goods for manufacturing dutiable products, entitling them to credit under Rule 3 of Cenvet Credit Rules, 2004. The Tribunal found that the notification restricting credit on capital goods used in manufacturing exempted goods did not apply in this case. The appellant's reliance on certain case laws was dismissed, and the Tribunal granted them the credit, allowing the appeal with consequential relief.

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Issues:
- Denial of credit under Notification No.13/2016-CE (NT) dated 1.3.2016 on capital goods used in manufacturing dutiable goods.

Analysis:
The appellant, located in Himachal Pradesh, availed area-based exemption but later opted out of it to manufacture dutiable goods. The appellant purchased capital goods installed between Nov. 2015 and March 2016. A show cause notice was issued for reversal of credit taken on these goods due to Notification No.13/2016-CE dated 1.3.2016, which restricts credit on capital goods used in manufacturing exempted goods. The appellant argued they are entitled to credit as they used the goods for manufacturing dutiable products. The appellant cited precedents like Welspun India Limited vs. CCE, Surat-2019 and International Cylinders Pvt. Ltd. vs. CCE & ST -2019 to support their case.

The respondent contended that as the capital goods were purchased when the appellant exclusively manufactured exempted goods, they are not eligible for credit under Notification No.13/2016-CE dated 1.3.2016, which applies prospectively.

After hearing both sides, the Tribunal found that the credit is available on capital goods under Rule 3 of Cenvet Credit Rules, 2004 if used in manufacturing dutiable goods. Since the appellant used the goods for dutiable products after opting out of area-based exemption, the notification in question does not apply. The Tribunal emphasized that the goods were indeed used for manufacturing dutiable goods, making the appellant eligible for credit. The Tribunal dismissed the relevance of the case laws cited by the appellant, stating they do not apply to the current case.

In conclusion, the impugned order denying credit was set aside, and the appeal was allowed with any consequential relief.

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