CENVAT credit eligibility for capital goods depends on commissioning date not receipt; credit upheld after commissioning.

CENVAT credit on capital goods is governed by the date when the goods became usable for providing the taxable service rather than mere date of receipt. Applying Rule 3 of the CENVAT Credit Rules, 2004, the tribunal found that separately purchased chassis and mixers lacked independent utility until mounted, calibrated and certified; commissioning reports established operational use only after the taxable service 'supply of tangible goods for use' took effect on 16.05.2008. Consequently, credit availed in June 2008 was lawful, the assessment denying credit was set aside, and related demand for interest and penalty fell away.

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Issues: Whether CENVAT credit availed in June 2008 on capital goods (transit mixers and chassis) purchased earlier is admissible where the capital goods became operational only after mounting and commissioning after 16.05.2008 (i.e., whether eligibility for credit is to be determined on date of receipt or date of commencement/use/commissioning).

Analysis: The Tribunal examined evidence showing that chassis and mixers, though purchased separately earlier, had no independent or standalone utility until mounted, balanced, aligned, calibrated, and finally commissioned as assembled vehicles. Commissioning records and job-work bills demonstrate that the completed machines came into existence and were capable of providing the taxable service only after 16.05.2008, the date from which 'supply of tangible goods for use' became taxable. The Tribunal reviewed applicable CENVAT Credit Rules including provisions governing availment of credit on capital goods and distinguished authorities that determine eligibility solely by date of receipt where capital goods were usable on receipt or were used for exempted output prior to becoming dutiable.

Conclusion: The appellant was entitled to avail CENVAT credit of Rs.41,87,562/- in June 2008 because the capital goods became operational and were put to use only after 16.05.2008; the impugned orders denying the credit and imposing interest and penalty are set aside and the appeal is allowed.

Ratio Decidendi: For capital goods that are not functional or commercially usable on receipt, eligibility for CENVAT credit is determined by the date of commencement of use/commissioning (date when the capital goods become operational for providing the output service), not by the date of receipt.

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