Whether credit admissible on components of capital goods even if they are not in possession in subsequent financial year?

PJ/Case Law /2016-17/3248

Case:- OWENS CORNING (INDIA) PVT. LTD. VERSUSCOMMISSIONER OF C. EX., BELAPUR

Citation:- 2015 (39) S.T.R. 158 (Tri. - Mumbai)

Brief Facts:- The brief facts of the case are that the appellant has filed this appeal against the impugned order passed by the Commissioner of Central Excise, Belapur. The appellant is 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.

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 Judgement:- The authority find 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 above clear cut provision, there is no prohibition as regards taking of cenvat credit on components of capital goods even if such components are not in possession of the assessee in subsequent financial year.

Decision:-Appeal allowed.

Comment:-The essence of the case is that as per Rule 4(2)(b) of the Cenvat Credit Rules, cenvat credit on components, spares and accessories, refractories and refractory materials, moulds and dies etc is admissible even if they are not in possession of the assessee in subsequent year. Therefore, credit cannot be denied merely on the grounds that components were not in possession in subsequent financial year.

Prepared by- Akshit Bhandari

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PJ/Case Law /2016-17/3248

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