Commissioner of C. Ex. vs Progressive Systems

N. Kumar, J.—This appeal is by the Revenue challenging the order passed by the Tribunal 2010 (251) ELT 536 .] which granted the benefit of Cenvat Credit to the Assessee, setting aside the order passed by the lower authorities.

The Assessee is a manufacturer of excisable goods, i.e., machine tools falling under Chapter 84 of the I Schedule to the Central Excise Tariff Act, 1985. They were registered under the Central Excise on 16-4-2007 for manufacture of excisable goods. They availed Cenvat Credit of Rs. 12,62,621/- in respect of certain capital goods which were procured in the year 2006-07 and 2007-08. Proceedings were initialed against the Assessee on the ground that they have availed Rs. 6,31,311-00 Cenvat Credit, to which they were not entitled to. On being communicated the Assessee reversed the amount of Rs. 6,31,311-00 under protest. Therefore an order came to be passed under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944, demanding the aforesaid amount. Aggrieved by the same the Assessee preferred an appeal. The appellate authority affirmed the said order. Aggrieved the Assessee preferred an appeal to the Tribunal. The Tribunal held that Rule 3(1) of the Rules governs availment of credit of various types of duties. There is no bar in an SSI unit taking Cenvat credit on inputs or capital goods received dining 2006-07. The SSI unit can accumulate capital goods credit till it exhausts the exempted value of clearances and starts paying duty, therefore. The Tribunal held that as per Rule 4(2) of the Rules an Assessee can avail capital goods credit up to 50% in the year of receipt of the goods and balance in subsequent financial years. There is no prescription that credit to any extent has to be availed in the year of receipt of capital goods. In the instant case, entire credit has been availed in 2007-08, the year following receipt of the goods. The said availment is not inconsistent with the legal provisions. Therefore the Tribunal set aside the impugned order and allowed the appeal granting relief to the Assessee. Aggrieved by the same, the Revenue has preferred this appeal.

The learned Counsel appearing for the Revenue assailing the impugned order contended that in view of Section 4(2) of the Rules, the Assessee must utilize the Cenvat credit in the year of its availment. It is only remaining 50% they can utilise at any point of time. In the instant case, admittedly, the Assessee did not utilise Cenvat credit in the year in which the Cenvat credit was availed. Therefore he submits that the Tribunal committed a serious error in setting aside the order passed by the appellate authority as well as the original authority.

Per contra, the learned Counsel for the Assessee supported the impugned order.

This appeal was admitted on 13-9-2010 to consider the following substantial question of law

Whether the tribunal was justified in granting exemption to ''the extent of 50% to the Assessee. ever: when the Assessee did not qualify for any exemption under Rule 4(2) of the Cenvat Credit Rules, 2004, as the Assessee had not obtained registration for the period during the Cenvat credit was claimed i.e., for the period 1-4-2006 to 31-3-2007, whereas the Assessee obtained registration only on 16-4-2007?

It is not in dispute that the Assessee registered under Rule 9 of the Central Excise Rules 2002 on 16-4-2007, which is a condition precedent for utilizing the Cenvat credit. It is also not in dispute that the Assessee availed Cenvat credit during the period 2006-07. As the Assessee had not yet registered its Unit under the Rules, the Assessee was not entitled to utilize Cenvat credit in the year of acquiring the same. Rule 4(2)(a) of the Cenvat Credit Rules provides that only to the extent of 50% of the Cenvat Credit could be utilized by the Assessee during the year it is availed of. However, the said Rules do not mandate that the credit should be utilized in the very same year. Once the credit is not utilized in the same year, then Rule 4(2)(b) provides that it can be utilized in any year and to the full extent. Therefore, in the instant case, as the Cenvat Credit was availed of in the year 2006-07, when the Assessee had not yet registered under Rule 9 of the Central Excise Rules, the Assessee did not utilize the Cenvat credit. It is only after registration, in the subsequent year, they have utilized the entire Cenvat credit which was standing to their credit. Therefore the finding of the Assessing Officer as well as the First Appellate Authority that they could not have utilized 100% credit is erroneous. The Tribunal was justified in setting aside the said irregularity and allowing Cenvat credit to the Assessee in the next year of its availment under the Rules.

We do not find any merit in this appeal. Accordingly it is dismissed.