2009 (8) TMI 591 - AT - Central Excise

Appellate Tribunal allows appeal, grants Cenvat credit on capital goods for SSI unit.

The Appellate Tribunal CESTAT, Bangalore, allowed the appeal by M/s. Progressive Systems, setting aside the demand for Cenvat credit on capital goods. The ... Cenvat credit on capital goods - availment versus utilization of credit - SSI exemption and accumulation of capital goods credit - Rule 3(1) of the Cenvat Credit Rules, 2004 - Rule 4(2) of the Cenvat Credit Rules, 2004 - registration and filing of returns for availment of credit - recovery under Rule 14 read with Section 11ACenvat credit on capital goods - Rule 3(1) of the Cenvat Credit Rules, 2004 - SSI exemption and accumulation of capital goods credit - registration and filing of returns for availment of credit - Entitlement of the assessee to avail Cenvat credit on capital goods procured during 2006-07 while availing SSI exemption and not being registered during that financial year. - HELD THAT: - The Tribunal found that Rule 3(1) of the Cenvat Credit Rules, 2004 governs availment of credit and does not bar an SSI unit from taking Cenvat credit on inputs or capital goods received during 2006-07. Reliance upon the Authority for Advance Rulings decision and the CBEC clarification confirmed that an SSI unit may accumulate capital goods credit while availing exemption and use it upon crossing the prescribed exemption threshold. The Additional Commissioner's conclusion denying availment on the ground that the assessee was not registered and had not filed returns was held to be contrary to Rule 3(1) and the Board's clarification; the Tribunal therefore rejected the view that mere absence of registration during the relevant financial year rendered the assessee ineligible to avail the credit.Assessee entitled to avail and accumulate Cenvat credit on capital goods received in 2006-07 despite availing SSI exemption; denial on grounds of non-registration and non-filing was set aside.Rule 4(2) of the Cenvat Credit Rules, 2004 - availment versus utilization of credit - Permissibility of availing the entire capital goods credit in 2007-08 (the year following receipt) instead of availing 50% in the year of receipt. - HELD THAT: - The Tribunal observed that Rule 4(2) permits availment of capital goods credit up to 50% in the year of receipt and the balance in subsequent years, but does not mandate that any portion of credit must necessarily be availed in the year of receipt. Consequently, the assessee's availment of the entire credit in 2007-08, the year following receipt, was held to be consistent with the statutory scheme and not contrary to law. The Additional Commissioner's finding that the assessee wrongly availed the entire credit in 2007-08 was therefore quashed.Availment of the entire capital goods credit in 2007-08 was upheld as permissible under Rule 4(2); the finding of wrongful availment was set aside.Final Conclusion: The impugned order denying Cenvat credit and confirming demand and penalty was set aside; the appeal is allowed and the stay application disposed of. The Appellate Tribunal CESTAT, Bangalore, consisting of Members M.V. Ravindran and P. Karthikeyan, heard an appeal from M/s. Progressive Systems, Bangalore, seeking to vacate a demand of Rs. 6,31,311 for Cenvat credit on capital goods, interest, and penalty imposed by the Additional Commissioner and affirmed by the Commissioner (Appeals). The issue was whether the assessee was eligible to avail Cenvat credit on capital goods procured during 2006-07. The assessee, a Small Scale Industry (SSI) unit, had received capital goods during 2006-07 without registration and had availed the full exemption. The Additional Commissioner alleged the assessee availed the entire credit on capital goods in 2007 instead of 50% in 2006-07, making them ineligible. The assessee contended they had availed the credit in 2006-07 and relied on rulings supporting their position. The Commissioner (Appeals) found the issue was one of availment, not utilization, and upheld the demand. The Tribunal ruled that there was no bar for an SSI unit to take Cenvat credit on capital goods received during 2006-07, contrary to the Additional Commissioner's decision. They held that the assessee's actions were consistent with legal provisions and set aside the impugned order, allowing the appeal. The stay application was also disposed of. The order was pronounced on 17-8-2009.