LIMITAION PERIOD OF CENVAT CREDIT ON IMPORTED CAPITAL GOODS

[BALRAJSINGH VIRDI]

Dear Sir

Please help me out to resolve the issue- that i had bought machineries in year 2011 for production in my works, but failed to claim input in same and next year, but 50% claimed in year 2014-15 and balance in 2015-16, will it be allowed or not.

Please suggest

[Rajagopalan Ranganathan]

Sir,

As per the Cenvat Credit Rules, 2014. credit of duty paid on capital goods can be taken @50% of duty paid in the first year of purchase (in your case 2011-12). the remaining 50% can be take in any of the remaining years. If you did not take the first half in the first year of purchase, then you can take 100% credit in the second or subsequent years. Therefore you could have taken 100% credit in the year 2014-15. However, the credit taken by you is correct.

[KASTURI SETHI]

Dear Querist,

During the Central Excise era, there was no time limit applicable for taking Cenvat Credit on Capital Goods. Rule 4(1) of Cenvat Credit Rules, 2004 (as amended from time to time up to 30.6.17) imposes restriction of time limit on taking credit relating to inputs and Rule 4(7) imposes restriction of time limit on taking credit to input services.

Go through Rule 4(2)(a) of Cenvat Credit Rules, 2004 which is extracted below:-

Rule 4(2)(a) : The CENVAT credit in respect of capital goods received in a factory or in the premises of the provider of output service [or outside the factory of the manufacturer of the final products for generation of electricity for captive use within the factory, [or in the premises of the job worker, in case capital goods are sent directly to the job worker on the direction of the manufacturer or the provider of output service, as the case may be]] at any point of time in a given financial year shall be taken only for an amount not exceeding fifty per cent. of the duty paid on such capital goods in the same financial year :

Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if such capital goods are cleared as such in the same financial year :

Rule 4 (2)(b) says (b) The balance of CENVAT credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, or in the premises of the provider of output service,

Hence it is NOT that Cenvat Credit on capital goods must be taken in the first year. An assessee can opt to take credit on capital goods in any subsequent financial year, as even if the assessee takes NIL credit in the first year, that person conforms to the condition or requirement/parameter of Rule (2)(a), inasmuch as it is crystal clear that 'NIL' does not exceed 50%.

Board vide its letter DOF No.334/15/2014-TRU dated 10.7.14 has also confirmed.

[Ganeshan Kalyani]

I agree with the Experts comment. The Cenvat Credit on the Capital Goods was allowed to be taken to the extend of 50% in the first year of purcahse of such goods and balance credit was allowed to be taken in the next year. If by any reason the credit was missed to be taken in the first year then in the following year full credit can be taken.

[KASTURI SETHI]

Relevant extract of Case law in support of above replies :

2019(12) TMI-939-CESTAT Ahemdabad Sumangal Glass Industries Pvt. Ltd. Vs. CCE Ahmedabad

"10. As regards the another reason for denial by the Adjudicating Authority that appellant have taken 100% credit instead of 50%, we find that the year of receipt of capital goods is 2005-06, whereas the credit was taken in October 2007. As per Rule 4(4), it is clear provision that part of taking 50% credit is applicable only if Cenvat credit is availed in the year of receipt of capital goods. As per proviso to sub-rule, the assessee is entitled for the credit of remaining 50% in the subsequent Financial Years. That means, in the subsequent year of receipt of capital goods, the appellant is entitled for 100% Cenvat credit. Therefore, on this ground, the denial of Cenvat credit is not correct and legal. This issue has been considered elaborately by CESTAT Bangalore in the case of Progressive Systems (supra) and as per the facts of the said case, the entire credit was availed in 2007-08, the year following receipt of goods, it was held that in terms of Rule 4(2) of Cenvat Credit Rules, 2004, assessee can avail credit upto 50% in the year of receipt of goods and balance in the subsequent Financial Years. There is no prescription that credit of any extent to be availed in the year of receipt of capital goods. Accordingly, the Tribunal held that availment is not inconsistence with legal provisions and the appeal was allowed. This very decision of the Tribunal was challenged by the Revenue before the Hon’ble Karnataka High Court (supra) and the Division Bench of the Hon’ble Court maintained the Tribunal order and dismissed the Revenue’s appeal. In view of this settled position by the Hon’ble Karnataka High Court, availment of Cenvat credit by the appellant to the extent of 100% in the subsequent year of receipt is absolutely legal and correct."

AI Summary

Claim Full Cenvat Credit for Capital Goods Purchased in 2011 Under Cenvat Credit Rules 2014, No Time Limit Imposed An individual sought advice on claiming Cenvat Credit for capital goods purchased in 2011 but claimed partially in subsequent years. Experts clarified that, under Cenvat Credit Rules, 2014, credit can be claimed at 50% in the first year of purchase, with the remaining 50% in subsequent years. If the first-year credit was not claimed, the full credit can be claimed in later years. There was no time limit for claiming credit on capital goods during the Central Excise era. Legal precedents support the legality of claiming 100% credit in subsequent years if not initially claimed.