Whether assessee is entitled to 50% credit of components in the subsequent year even if the same are not in his possession in the subsequent year?

PJ/Case Law /2016-17/3412

Case:-OWENS CORNING (INDIA) PVT. LTD. Versus COMMISSIONER OF C. EX., BELAPUR
Citation:-2015 (39) S.T.R. 158 (Tri. - Mumbai)
Brief facts:-The appellant filed this appeal against the impugned order passed by the Commissioner of Central Excise, Belapur. The appellant are engaged in the manufacture of glass fibre. The appellant availed Cenvat credit in respect of ‘bushing’ as parts of capital goods. The glass fibre is manufactured by drawing the molten glass through these bushings. The appellant availed credit of 50% of the duty paid in respect of bushings and further availed credit of balance 50% of the duty in the subsequent financial year as per the provisions of Rule 4(2)(a) and (b) of the Cenvat Credit Rules, 2004. Revenue confirmed the demand in respect of 50% of the credit availed in the subsequent financial year on the ground that the appellant are not entitled for the remaining 50% of the credit which was availed in the subsequent financial year, as the bushings are not in the possession and use of the appellant.
Appellant’s contention:- The contention of the appellant is that the bushings, after use were re-exported for re-making. The contention is that balance of Cenvat credit in respect of the capital goods may be taken in any financial year subsequent to the financial year in which the capital goods are received in the factory, if the capital goods, other than components, spares and accessories are in the possession of the manufacturer of final products. The contention is that the provisions of Rule 4(2)(a) and (b) are not applicable in respect of the components, spares and accessories of the capital goods. The applicant are entitled to avail 50% of the credit in the next financial year.
Respondent’s contention:-The contention of the Revenue is that, at the time of taking of 50% of the remaining credit in subsequent year, the bushings received by the appellant are newly manufactured bushings. Therefore, as the capital goods on which 50% of the credit has been taken on receipt of the capital goods in the factory were not in possession and use in the subsequent financial year. Therefore, credit was rightly denied in respect of balance 50% of the credit which was availed in the subsequent financial year.
Reasoning of judgment:-The Tribunal found that the goods in question are components which are entitled for credit as capital goods. As per the provisions of Rule 4(2)(b) of the Cenvat Credit Rules the condition that the same should be in the possession of the manufacturer in the subsequent financial year is not applicable to the components. For ready reference, provisions of Rule 4(2)(b) are reproduced below :
“(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, if the capital goods, other than components, spares and accessories, refractories and refractory materials, moulds and dies and goods falling under heading 6805, grinding wheels and the like, and parts thereof falling under heading 6804 of the First Schedule to the Excise Tariff Act, are in the possession of the manufacturer of final products, or provider of output service in such subsequent years.”
In view of the provisions of Cenvat Credit Rules as above, the tribunal found merit in the contention of the appellant. Therefore, the impugned order was set aside and the appeal was allowed.
(Dictated in Court)
Decision:-Appeal allowed.
Comment:-The gist of the case is that the assessee manufactured glass fibre and availed Cenvat credit in respect of ‘bushing’ as capital goods. 50% of the credit was availed by the assessee in the year of purchase and the rest 50% in the subsequent financial year. The revenue contended that the assessee was not entitled to get 50% of credit in the subsequent financial year as the capital goods were no longer in possession and use of assessee. The Tribunal held that since, the condition that the capital goods should be in possession of the manufacturer in the subsequent financial year is not applicable to components, so , the assessee was entitled to 50% Cenvat credit in the subsequent financial year for component of bushing used in manufacture of glass fibre in accordance with Rule 4(2) of Cenvat Credit Rules, 2004.
Prepared by:-Praniti Lalwani

Comments

PJ/Case Law /2016-17/3412

Post a Comment

Query