Whether 100% credit admissible if ‘used’ capital goods are cleared in the year of purchase?

PJ/CASE LAW/2014-15/2520

Case:-M/s NILKAMAL LTD Vs COMMISSIONER OF CENTRAL EXCISE, BOLPUR

Citation:-2014-TIOL-2648-CESTAT-KOL

Brief facts:-Briefly stated the facts of the case are that a show cause notice dated 14/2/2008 was issued to the appellant alleging that during the period from April, 2003 to November, 2007, they have irregularly availed CENVAT Credit on moulds amounting to Rs.3,01,95,614/-. It was alleged that the appellant had availed CENVAT Credit on moulds as 'capital goods' equivalent to 50% of the duty paid on such moulds on its receipt and instead of availing the balance 50% in the next financial year, it was availed in the same financial year after putting the same to use for sometimes in their factory and cleared subsequently to their other units in the same financial year.
It is the Revenue's allegation that the moulds after being put to use and on its clearance from the factory after some time, cannot be called 'as such', under Rule 4 (2) (a) of CENVAT Credit Rules, 2002/2004. On adjudication, the demand notice was confirmed and penalty was imposed under Rule 13 (2)/15 (2) of CENVAT Credit Rules, 2002/2004, as the case may be, read with Section 11AC of CEA, 1944; also recovery of interest at the appropriate rates, under Rule 12/14 of CENVAT Credit Rules 2002/2004 read with Section 11AC of CEA, 1944 has been confirmed. Hence, the present appeal.

Appellant’s contention:-The Ld. Advocate for the applicant submitted that the demand has been confirmed solely on the ground that the moulds which the appellant had used in their factory after availing 50% of the eligible credit, did not remain "as such", hence, availing of balance 50% credit in the same financial year, at the time of its clearance from the factory, was irregular. The Ld. Advocate submits that even after the moulds are put to use in the factory, it cannot be said that at the time of its clearance from the factory it is not the clearance "as such", in view of the judgment of the Larger Bench of this Tribunal in the case of Modernova Plastyles Pvt. Ltd. reported in 2008 (232) ELT 29 (Tri-LB) = 2008-TIOL-1771-CESTAT-MUM -LB which has been upheld by the Hon'ble Bombay High Court.

Respondent’s contention:-The Ld. A.R. for the Revenue reiterated the findings of the Ld. Commissioner.

Reasoning of judgment:-The facts are not in dispute that the appellants are engaged in the manufacture of finished excisable goods and in the manufacture of their final product, they availed CENVAT Credit, inter-alia , on moulds as capital goods. On receipt of the said moulds in their factory, the appellant availed 50% of the eligible CENVAT Credit and put the same to use in their factory for further manufacture of finished excisable goods. The appellant, in the same financial year, at the time of clearance of the said moulds to their sister concern, availed balance 50% of the CENVAT Credit and cleared the said moulds, as such, by debiting the entire amount of CENVAT Credit availed on such moulds. The Revenue has denied the balance 50% of the CENVAT Credit in the same financial year on the ground that once moulds are put to use, the same loose the character "as such", hence the appellant could not be eligible to avail CENVAT Credit on the balance 50% of the CENVAT Credit at the time of its clearance in the same financial year. In another words, there is no dispute that the appellant are eligible to CENVAT Credit on the balance 50%, in the next financial year. The moot point, therefore is, whether the moulds on its use in the factory for some time, cannot be called "as such" within the meaning of the said expression as laid down under Rule 4 (2) (a) of CENVAT Credit Rules, 2004. We find that the issue is squarely covered by the decisions of Larger Bench of this Tribunal in the case of Modernova Plastyles Pvt. Ltd. case (supra) which has been later upheld by the Hon'ble Bombay High Court vide its order dated 4th November, 2009. A somewhat similar view has also been expressed later, by another Larger Bench, in the case of Commr. of Central Excise, Hyderabad-III Vs. Navodhaya Plastic Industries Ltd. reported in 2013 (298) E.L.T. 541 (Tri.-LB) = 2013-TIOL-1773-CESTAT-MAD-LB, and for the purpose of determination of the quantum of depreciation, for period after November, 2007 amendment to the said Rule, judgment of the Hon'ble Madras High Court in the case of CCE, Salem Vs. Rogini Mills Ltd.-2011 (264) E.L.T. 367 (Madras) = 2011-TIOL-05-HC-M AD-CXhas been followed. In the present case, we do not find any dispute on the reversal of the quantum of credit; the Appellant had reversed the entire amount of CENVAT credit availed before removal of the capital goods in the same financial year. In the result, we have no hesitation to conclude that the capital goods which were put to use and when cleared from the factory, would be eligible to the balance 50% of CENVAT credit available on such capital goods on its clearance from the factory in the same financial year. Consequently, we do not find merit in the order of the Ld. Commissioner (Appeal) and the same is set aside and the appeal filed by the appellant is allowed with consequential relief, if any, as per law.

Decision:-Appeal allowed.

Comment:- The analogy of the case is that the assessee may avail 100% capital goods credit in the year of purchase of capital goods even if the capital goods, after being used for some time are cleared in the same financial year. The reason for the same being that the assessee had reversed the entire credit availed by them on clearance of such capital goods.

Prepared by:- Monika Tak

Comments

PJ/CASE LAW/2014-15/2520

Post a Comment

Query