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2016 (3) TMI 617 - CESTAT NEW DELHI

2016 (3) TMI 617 - CESTAT NEW DELHI - TMI - CENVAT credit on capital good utilised only for manufacture of finished goods, namely, cotton yarn, which was cleared under Notification No.30/2004-CE, dated 09.07.2004 without payment of duty - Held that:- It is seen that the impugned credit was reversed on 13.06.2005, i.e., before even the Show Cause Notice (dated 25.10.2005) was issued. Also it is just that in the initial phase the appellant cleared yarn duty free under Notification No.30/2004-CE. B .....

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seen that the recovery of the impugned amount was ordered in terms of Rule 14 of CENVAT Credit Rules, 2004 read with Section 11A of Central Excise Act, 1944.

As the impugned amount was reversed even prior to issuance of Show Cause Notice in this case, even issuance of Show Cause Notice to demand the impugned credit was not necessary. In these circumstances, imposition of penalty is not warranted in this case.

The appeal is allowed by way of remand to the primary adjudicatin .....

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Respondent : Mr. Vaibhav Bhatnagar, DR ORDER PER MR. R.K. SINGH : Heard both sides. 2. The facts of the case are as under:- Show Cause Notice was issued on 25.10.2005 alleging that the appellant has availed CENVAT credit of ₹ 45,33,836/- on capital goods, which were utilised only for manufacture of finished goods, namely, cotton yarn, which was cleared under Notification No.30/2004-CE, dated 09.07.2004 without payment of duty. The case was adjudicated and vide Order-in-Original dated 28.0 .....

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02.026.2016, it also started paying duty on cotton yarn under Notification No.29/2004-CE and therefore, the credit on the impugned capital goods should be allowed atleast w.e.f. 02.02.2006 as from that date onwards, the said capital goods were not used exclusively for manufacture of exempted goods. He conceded that this contention was not raised before the lower authorities. The ld. Counsel cited the decision of CESTAT in the case of Brindavan Beverages Pvt. Ltd. Vs. CCE [2014 (310) ELT 398 (Tri .....

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pital goods was clearly inadmissible when it was taken. The appellant has claimed that the capital goods began to be used for manufacture of yarn which was cleared on payment of duty also under Notification No.29/2004-CE w.e.f. 02.02.2006 and if that be so then on that date the credit on the impugned goods cannot be held to be inadmissible. In the case Brindavan Beverages Pvt. Ltd. Vs. CCE (supra), CESTAT in paras 6 and 7 held as under:- 6. The undisputed facts are that the capital goods, in que .....

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006 onwards they have started using these machines for manufacture of aerated waters which are dutiable final product and this fact is not disputed by the Department. According to the appellant, they are eligible for capital goods Cenvat credit, as in terms of the provisions of Rule 6(4) of the Cenvat Credit Rules, 2004, the capital goods Cenvat credit is to be denied only when the capital goods have been used exclusively for manufacture of exempted final product, not when the capital goods are .....

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cture of aerated waters (dutiable final product), they would be eligible for Cenvat credit. According to the appellant, the judgment of the Tribunal in the case of CCE, Indore v. Surya Roshni Ltd. (supra) is not applicable to this case, as in this case, from the very beginning their intention was to use the machinery for manufacture of dutiable as well as exempted final product and that for this purpose, it is not necessary both dutiable and exempted final products have to be manufactured simult .....

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is sub-Rule, it is clear that capital goods Cenvat credit would be admissible when the capital goods are used either only for dutiable final product or for dutiable as well as exempted final product. The capital goods Cenvat credit is also admissible when a manufacturer is availing full duty exemption based on the value or quantity of the goods cleared in a financial year, in which case, while initially the manufacturer will be availing full duty exemption (for some months or for several financi .....

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well as exempted final product have to be manufactured simultaneously. In our view this is not necessary, and Cenvat credit would be admissible even if the capital goods are used for manufacture of dutiable goods and exempted goods at different points of time. However, if at the time of receipt of the capital goods, the manufacturer was using the capital goods only for manufacture of fully exempted final product and had no plan or intention to use them for dutiable final products and later on, e .....

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the time of receipt, he uses the capital goods for manufacture of exempted final product and subsequently he switches over to the manufacture of dutiable final product, the capital goods Cenvat credit cannot be denied. When at the time of receipt of capital goods, capable of use in manufacture of dutiable as well as exempted final products, there is evidence to show that the manufacturer had intention to use them for manufacture of dutiable as well as exempted final product, the eligibility of t .....

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d goods on trial basis and subsequently were used for manufacture of dutiable goods when regular production was started, the Cenvat credit in respect of capital goods cannot be denied and the Tribunal s judgment in case of M/s. Surya Roshni Ltd. (supra) would not be applicable. In the case of Oswal Woollen Mills Pvt. Ltd. CCE [2012 (284) ELT 240 (Tri.-Del)], CESTAT has held as under:- 5.In the present case, the appellants final product is not fully exempted inasmuch as they are also availing th .....

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s fully exempted. The above cited judgements also support the view that the impugned credit cannot be held inadmissible on the date the impugned capital goods were used to manufacture goods which were cleared on payment of duty. 5. It is seen that the impugned credit was reversed on 13.06.2005, i.e., before even the Show Cause Notice (dated 25.10.2005) was issued. Also it is just that in the initial phase the appellant cleared yarn duty free under Notification No.30/2004-CE. Both Notifications, .....

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