Credit availment prior to registration.

PJ/CASE LAW/2014-15/2532

Case:-BEICO INDUSTRIES PVT. LTD. VERSUS COMMR. OF C. EX. & SERVICE TAX,VAPI

Citation:-2014 (36) S.T.R. 551 (Tri. - Ahmd.)

Brief Facts:- Both the appeals are arising out of a common order and therefore, both are taken up together for disposal. The relevant facts that arise for consideration are the appellant herein had availed Cenvat credit of the central excise duty paid on certain capital goods and service tax on input services which were received prior to the date of obtaining registration.

The assessee is a 100% export oriented unit. The export of software at the relevant point of time was not a taxable service. However, the assessee had paid input tax on various services. According to the assessee a sum of Rs. 4,36,985/- is accumulated Cenvat credit. In the case in hand, we find that there is no dispute that appellant has received the capital goods and the input services, utilized them for setting up the manufacturing facilities. The Tribunal has categorically held that even though the export of software is not a taxable service but still the assessee cannot be denied the Cenvat credit. The assessee is entitled to the refund of Cenvat credit. Similarly insofar as refund of Cenvat credit is concerned, the limitation under Section 11B does not apply for refund a accumulated Cenvat credit. Therefore, bar of limitation cannot be a ground to refuse Cenvat credit to the assessee.

Revenue authorities were of the view that as the appellant was not registered with the central excise department under Rule 9 of the Central Excise Rules, 2002, they were not eligible to avail the Cenvat credit.Coming to such a conclusion, show cause notices were issued to the appellant. The adjudicating authority after following due process of law confirmed the demands along with interest and penalties.

Appellant Contentions:-Ld. Counsel while assailing the impugned order would draw our attention to the findings recorded by the adjudicating authority. It is his submission that the appellant herein are engaged in manufacturing of excisable goods and discharge appropriate duty liability as per the law and the central excise registration could have been obtained by them only after the installation of the capital goods and trial runs. It is his submission that all the inputs, capital goods and input services were received and consumed for the erection of the plant which manufactured excisable goods. He would submit that it is a settled law that credit cannot be denied on the capital goods and input services which were consumed for setting up of the factory.

He would rely upon the recent judgment of Hon’ble High Court of Karnataka in the case of mPortal India Wireless Solutions Pvt. Ltd. v. CCE, Bangalore - 2012 (27)S.T.R. 134 (Kar.).

Respondent’s Contention:- On the other hand, the Ld. Departmental Representative on the other hand defending the order submits that the eligibility to avail Cenvat credit of the central excise duty paid on capital goods would be on a situation as to when the capital goods were received, whether the products were dutiable or not. It is his submission that the appellant herein received the capital goods and input services prior to the registration i.e. when the manufacturing activity itself did not start is akin to the goods not been excisable.

He would rely upon the decision of this Bench in the case of CCE, Suratv. Aneri Construction - 2012 (286)E.L.T. 639 (Tri.-Ahmd.) = 2012 (28)S.T.R. 578 (Tri.-Ahmd.).

Reasoning of Judgment:- We have carefully considered the submissions by both the sides and also perused the records. As regards the decision relied upon by the ld. Departmental Representative, on perusal of the said decision, we find that the issue involved in that case is the assessee therein had received air compressors on 5-5-2005; on which date, the said air compressor were utilized for providing an output service of laying long distance pipeline which was not covered under the category of taxable services till 16-6-2005. This factual aspect needs to be considered, due to which the ratio in the case of Aneri Construction (supra), is held as inapplicable in this case.

Accordingly in view of the foregoing, we find that the impugned orders are unsustainable and liable to be set aside and we do so.

Insofar as requirement of registration with the department as a condition precedent for claiming Cenvat credit is concerned, learned counsel appearing for both parties were unable to point out any provision in the Cenvat Credit Rules which impose such restriction. In the absence of a statutory provision which prescribes that registration is mandatory and that if such a registration is not made the assessee is not entitled to the benefit of refund, the three authorities committed a serious error in rejecting the claim for refund on the ground which is not existence in law. Therefore, said finding recorded by the Tribunal as well as by the lower authorities cannot be sustained. Accordingly, it is set aside.

While trying to deny the Cenvat credit to the appellant on this ground, we find that the adjudicating authority has taken a diagonally opposite direction, as against the principles of the reducing the cascading effect of taxes. It is a common sense that unless a factory is setup, trial runs are taken, an assessee will be unable to manufacture excisable products. The entire exercise of the assessee for setting up of factory is for manufacturing excisable goods which can be done so only when he erects, installs and commissions the capital goods with the help of various agencies. In the case in hand, we find that there is no dispute that appellant has received the capital goods and the input services, utilized them for setting up the manufacturing facilities. To deny credit of the central excise duty paid and Service Tax paid, would be travesty of justice. The view of the Tribunal is fortified by the judgment of the Hon’ble High Court of Karnataka in the case of mPortal India Wireless Solutions Pvt. Ltd. v. CCE, Bangalore (supra).

Consequently, the impugned orders are set aside and appeals are allowed.

Decision:-Appeal was allowed.

Comment:- The essence of the case is that the denial of CENVAT credit on capital goods or input services for want of registration with the central excise department is not sustainable. In the case in hand, there was no dispute that appellant has received the capital goods and the input services and had utilized them for setting up the manufacturing facilities and so the credit was held to be admissible.

Prepared By: Neelam Jain

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PJ/CASE LAW/2014-15/2532

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