AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (9) TMI 20
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....payment of duty. The appellant has three production lines in their factory of manufacture. Line 1 is used to manufacture carbonated soft drinks in returnable bottles and Line 2 to manufacture carbonated soft drinks in pet bottles and there is no dispute about the entitlement of CENVAT credit of capital goods on these two lines. As far as Line 3 is concerned, it was audited in 2004-2005 and found that it is capable of manufacturing for both carbonated and non-carbonated soft drinks i.e., both dutiable goods and exempted goods. The appellant had taken CENVAT credit on the machinery used in Line 3 but during the periods 2004-2005 and 2005-2006 but used this line exclusively for manufacture of exempted non-carbonated beverages. Officers of the Central Excise Department gathered information and investigated the matter and found that they had appellant had used the equipment in Line 3 exclusively for manufacture of non-carbonated beverages exempted during the period 2004-2005 and 2005-2006. It was also found that the irregularly taken CENVAT credit on this machinery in violation of Rule 6 (4) of the CENVAT Credit Rules. Statements of the concerned officials of the appellants were recorde....
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....ly relied on the ratio of the judgment of the Apex Court in the case of Surya Roshni Limited, as their case is distinguishable inasmuch as their goods were not exempted at the time they purchase the capital goods. In fact, they had every intention of using the capital goods for manufacture of dutiable and exempted products at the time of purchase and the same was intimated to the Department. At no point of time was it indicated their machinery will be exclusively used in manufacture of exempted products only. If they were using Line 3 exclusively for exempted products credit could have been denied under Rule 6(4) of the CENVAT Credit Rules, 2004. It is not material when and to what extent the capital goods are used for manufacture of dutiable goods. As long as, the equipment or machinery is used for manufacture of dutiable goods, they are entitled to the benefit of CENVAT credit in terms of Rule 6(4). He draws our attention to the letter of their Executive Director dated 20.03.2005 intimating the expansion project and the letter of Range Superintendent dated 23.08.2005 asking for the details of goods manufactured and their reply dated 04.11.2005 explaining that till that date they ....
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....n after the period of dispute, the appellant has used the machinery only for 19 days to manufacture dutiable goods after two years from the installation and not thereafter. Therefore, the appeals may be rejected. It is her further submission that the case law laid down in the case of Surya Roshni Ltd., and upheld by the Apex Court (supra) is squarely relevant to this case, as at the time of receipt of the goods they only used the Line for manufacture of exempted products. It is irrelevant that they have, after a period of two years, used for manufacture of dutiable goods for a short period of 19 days. 7. We have examined the arguments on both sides. The facts are not in dispute that plant is capable for manufacture of both dutiable and exempted products. The appellant had intimated his intention to use the machinery (at the time of receipt of the capital goods) to manufacture both exempted and dutiable goods but had used the plant exclusively for manufacture of exempted goods for the first two years. Thereafter, he used a plant for manufacture of dutiable products for a short period of 19 days and thereafter never used a plant for manufacture of dutiable products. The question to ....
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....llant, from October 2006 onwards they have started using these machines for manufacture of aerated waters which are dutiable final product and this fact is not disputed by the Department. According to the appellant, they are eligible for capital goods Cenvat credit, as in terms of the provisions of Rule 6(4) of the Cenvat Credit Rules, 2004, the capital goods Cenvat credit is to be denied only when the capital goods have been used exclusively for manufacture of exempted final product, not when the capital goods are used for dutiable as well as exempted final products and in this case the Cenvat credit cannot be denied as from the very beginning, the appellant's intention was to use the capital goods, in question, for manufacture of both, dutiable as well as exempted final product and that notwithstanding the fact that till September 2006, the machinery was used only for manufacture of fruit pulp based soft drinks (exempted final product), since they started using the machinery since October 2006 for manufacture of aerated waters (dutiable final product), they would be eligible for Cenvat credit. According to the appellant, the judgment of the Tribunal in the case of CCE, Indore v. ....
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....sing the capital goods for manufacture of dutiable final products, the judgment of the Tribunal in the case of CCE, Indore v. Surya Roshni Ltd. (supra) and Spenta International Ltd. v. CCE, Thane (supra) would become applicable. But, if at the time of receipt, the manufacturer had clear intention to use the capital goods for manufacture of dutiable as well as exempted final products, in such a situation just because at the time of receipt, he uses the capital goods for manufacture of exempted final product and subsequently he switches over to the manufacture of dutiable final product, the capital goods Cenvat credit cannot be denied. When at the time of receipt of capital goods, capable of use in manufacture of dutiable as well as exempted final products, there is evidence to show that the manufacturer had intention to use them for manufacture of dutiable as well as exempted final product, the eligibility of the capital goods for Cenvat credit cannot depend upon the order in which the same are used - whether first for the manufacture of exempted final products or for the manufacture of dutiable final product. We are supported in this view by the judgment of Hon'ble Gujarat High Cou....