Cenvat credit on capital goods may be taken later if not claimed in the year of receipt, where eligibility arose subsequently.

Cenvat credit on capital goods could be claimed in two stages: up to 50% in the year of receipt and the balance in a later financial year. The rule restricted only the credit available in the year of receipt; it did not cause unavailed credit to lapse. Where the assessee was under exemption when the capital goods were received and became eligible to opt for duty payment and the Cenvat scheme only in a later year, denial of credit merely because no credit was taken in the year of receipt was inconsistent with the rule. The 50% Cenvat credit was therefore allowable.

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Issues: Whether credit of 50% of duty on capital goods could be taken in a financial year subsequent to the year in which the capital goods were received, where no credit was availed in the year of receipt.

Analysis: The applicable rule permitted Cenvat credit on capital goods received in a given financial year only up to 50% of the duty paid in that year, and separately allowed the balance credit to be taken in a subsequent financial year. The restriction operated only on the quantum that could be claimed in the year of receipt; it did not provide that unavailed credit would lapse if not taken in that year. Since the appellants were under exemption when the capital goods were received and first became eligible to take credit on opting for duty payment and the Cenvat scheme in the later financial year, denial of the credit solely on the ground of non-availment in the year of receipt was contrary to the rule.

Conclusion: The denial of 50% Cenvat credit was unsustainable and the appellants were entitled to the credit.

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