CENVAT on Capital Goods lying in the factory but not in usable condition

[Ashok Chopra]

Dear Experts,

We purchased capital goods for the manufacture of Alloy Coated Sheet and availed CENVAT Rs. 32.00 Lac. Utilized the same in the clearance of ENTIRELY DIFFERENT PRODUCT in the same premises, same unit and name and style. Due to certain problems, we withdraw the idea of manufacturing Alloy Coated Sheet and bear a loss more than Rs. 5.00 crore on the development. The said capital goods was installed in the unit for trial production, but we could not produce the same due to technical error, the machinery is designed wrongly and  is not in PRODUCTION, even no single final product has been manufactured due to design problem and may not be in production or may be in production for the manufacture of any other dutiable final product  or job work but not now after a long time.  Central Excise Department is insisting to debit the said CENVAT alongwith interest.  What should i do? more than a period of four years has already lapsed.  Pls guide me accordingly

AI Summary

Business Challenges CENVAT Credit Repayment Demand; Rule 4(2) Allows Credit Despite Usage Change, Expert Cites Circular Support A business purchased capital goods for manufacturing but faced technical issues, preventing production. They claimed CENVAT credit of Rs. 32 lakh, but the goods were used for a different product. The Central Excise Department demands repayment with interest, as the goods were not used as intended. An expert clarifies that according to Rule 4(2) of the CENVAT Credit Rules, credit can be claimed even if goods are not used, except for the period from April 1, 2000, to September 9, 2004. The expert references a CBEC Circular and case law supporting this interpretation, suggesting the business may not need to repay.