Capital goods Cenvat credit accrues on receipt and installation; later rule changes and procedural lapses cannot defeat entitlement.

Credit on imported capital goods was treated as accruing on receipt and installation in the factory, so later application of the Cenvat Credit Rules, 2002 could not defeat entitlement under the regime then in force. Duty paid through TR6 challans was accepted as valid supporting evidence, and payment after an export obligation dispute did not alter the credit's character. Procedural omissions, alleged limitation, and claimed non-fulfilment of conditions were insufficient to deny substantive credit, and a ground not raised in the show cause notice could not be relied on to reject the claim.

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Issues: (i) Whether credit on duty paid on imported capital goods could be denied by applying the Cenvat Credit Rules, 2002 instead of the rules governing the date on which the capital goods were received and installed; (ii) Whether credit could be denied on the ground that payment was made through TR6 challans and after the export obligation dispute arose; (iii) Whether credit was barred for want of procedural compliances, alleged limitation, or alleged non-fulfilment of conditions, including the contention that the order travelled beyond the show cause notice.

Issue (i): Whether credit on duty paid on imported capital goods could be denied by applying the Cenvat Credit Rules, 2002 instead of the rules governing the date on which the capital goods were received and installed.

Analysis: The relevant event for availing credit was the receipt and installation of the capital goods in the factory, not the later date when the duty was ultimately discharged. Credit was treated as having been earned when the capital goods were received, and the governing credit provisions were those in force at that time. The denial based on Rule 3(1) of the Cenvat Credit Rules, 2002 was therefore inconsistent with the legal position that the entitlement crystallised earlier under the then applicable regime.

Conclusion: The objection based on Rule 3(1) of the Cenvat Credit Rules, 2002 was not sustainable, and the assessee was entitled to credit under the applicable earlier rules.

Issue (ii): Whether credit could be denied on the ground that payment was made through TR6 challans and after the export obligation dispute arose.

Analysis: The explanation to the credit rules recognised challans and similar documents evidencing payment of additional customs duty as sufficient documents. The duty paid nature of the amount was not in dispute, and Tribunal precedent accepted TR6 challans as valid for credit purposes. The fact that duty was paid after the export obligation dispute, or after settlement proceedings, did not destroy the character of the credit as earned credit.

Conclusion: Credit could not be denied merely because payment was made through TR6 challans or after the dispute had arisen.

Issue (iii): Whether credit was barred for want of procedural compliances, alleged limitation, or alleged non-fulfilment of conditions, including the contention that the order travelled beyond the show cause notice.

Analysis: The Tribunal held that no statutory time limit barred availment of credit on capital goods in the manner alleged, and that procedural omissions such as declaration or record-keeping could not defeat a substantive credit otherwise available. The installation and use of the capital goods had been certified and could not be re-opened without evidence. The allegation of fraud or wilful suppression was not properly pleaded in the show cause notice, and the Commissioner's reliance on a ground not contained in the notice, including depreciation-related reasoning, was impermissible.

Conclusion: The credit could not be denied on procedural, limitation, evidentiary, or beyond-notice grounds.

Final Conclusion: The assessee's entitlement to credit was upheld, the impugned order was set aside, and the appeal succeeded.

Ratio Decidendi: Credit on capital goods accrues on receipt and installation of the goods and cannot be denied by later credit-rule changes or procedural defects where the duty-paid nature of the amount is established.

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