TMI Blog2010 (5) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... arthikeyan, Member (T) REPRESENTED BY: Shri B. Seetha Ramaiah, Advocate, for the Appellant. Ms. Joy Kumar Chander, Jt. CDR, for the Respondent. [Order per : P. Karthikeyan, Member (T)]. - M/s. ABC Engineering Works, Vijayawada, the appellants herein are providing of services blast hole drilling, blasting, excavation loading, transportation dumping, etc. of overburden in open cast coal mines to M/s. Singareni Collieries Company Ltd., Kothagudem (SCCL). These activities were brought: under the tax net with effect from 16-6-2005 under the entry vide clause 97 (a) of Section 65 of the Finance Act, 1994. The authorities noticed that the appellants had availed Cenvat credit on capital goods namely, excavators during the half years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sembling the accessories and by the time they were put to use, the activities undertaken by them were brought under tax net (on 16-6-2005). There fore, they were entitled to avail credit of excise duty paid on the excavators and availed by them. 2.1 The CCR did not prohibit purchase of capital goods prior to levy of service tax. They had received the capital goods in their premises and had not put them in use in providing exempted services. Therefore they had correctly availed the capital goods credit demanded from them vide the impugned order. The Cenvat Credit Scheme was intended to provide relief to the service providers as well as manufactures from the cascading effect in discharging liabilities of service tax and excise duty. As the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e tax leviable thereon and includes services on which no service tax is leviable under section 66 of the Finance Act . As per Rule 6(4) of CCR: (4) No Cenvat credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods or in providing exempted services, other than the final products which are exempt from the whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearances made in a financial year. From the above statutory provisions, we find that a person engaged in providing exempted services is not entitled to Cenvat credit of duty paid on capital goods. We also find that in Spenta International Ltd. (supra) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Cenvat credit have to be satisfied at the time of receipt of such goods in the factory. It was also held that the capital goods dealt with in the case could not yield credit to the assessee as the same were not usable at the time of its receipt in the factory. The machinery could be available for manufacture of small quantity of dutiable goods which after its receipt in the factory that too after issue of sh9w cause notice. In Kaleesu wan Refinery Pvt. Ltd. (supra) case, the Tribunal similarly held that Rule 6(4) of CCR barred availment of credit on capital goods if at the time of receipt they are used exclusively in the manufacture of exempted products. We find that the decision in the ACE Timez (supra) case cited by the appellants was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C Circular relied on by the Commissioner is also to the same effect. In the circumstances, we find that the Commissioner had rightly held that the appellants were not entitled to Cenvat credit on capital goods received when it was engaged solely providing the exempted services. 6.1 The Commissioner has imposed a penalty of Rs. 25 lakhs on the assessee under Rule 15(1) of CCR. This rule provides for imposing penalty not exceeding Cenvat credit taken on inputs or capital goods or inputs service wrongly or in contravention of any of the CCR; a penalty shall not exceed the credit so taken or Rs. 2000/- whichever is greater. We find that the dispute involved was mainly of interpretation of the provisions of CCR. We are therefore of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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