TMI Blog2019 (1) TMI 423X X X X Extracts X X X X X X X X Extracts X X X X ..... e (4) of Rule 6 of Cenvat Credit Rules, 2004, availment of cenvat credit is barred in respect of capital goods which are used captively in the manufacture of exempted goods. However, when the manufacturer was entitled to take credit on the duty paid capital goods at the time of their receipt it would be unjust and beyond the provisions of law to deny availment of remaining amount of credit only on the grounds that at the time of taking the second instalment the final goods were exempted. What is important to be seen is the eligibility or otherwise availment of credit, at the time of receipt of the goods in the factory. Restriction of availment of 50% in the first financial year and the balance subsequently, is only a procedural compulsio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for Cenvat Credit during this period; that further the assessees cannot avail Cenvat Credit on capital goods used in manufacture of wholly exempted products, as per Rule 6 (4) of Cenvat Credit Rules. From the ER-1 returns filed by assessee, it appeared that they had taken credit on capital goods during the impugned period, i.e. between 07.12.2008 to 06.07.2009 and utilized the same. Hence Show cause notice No.23/2009-CE dated 30.12.2009 was issued to the assessee for disallowing the ineligible credit amounting to ₹ 31,79,050/- along with interest besides proposal to impose penalty under Rule 15 of Cenvat Credit Rules, 2004 was made. Original authority vide order dt.17.06.2011 held that manufacturers cannot opt to pay duty under Notifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... redit, the assessee cannot take Cenvat credit on capital goods. The purpose of taking credit is to meet the duty liability on final products and when the final product does not attract any duty liability, the question of availing credit does not arise. Under these circumstances, the assessee could neither take / avail nor utilize the credit of tax / duty paid on capital goods even if representing the goods received during the previous year. (iv) The contention that the eligibility of the capital goods is to be decided on the basis of receipt of the said goods and dutiability of the finished product at that time is not sustainable when the final product is wholly and unconditionally exempted on the date of taking credit. The assessee cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the capital goods were received in the factory of the manufacturer. c) As per sub-rule 6 (4) of CCR, no Cenvat credit shall be allowed on capital goods which are used exclusively in the manufacture of exempted goods other than the final products which are exempt from whole of the duty of excise leviable thereon under any notification where exemption is granted based upon the value or quantity of clearance made in a financial year. In view of the above provisions, it is observed that once a manufacturer is entitled to take credit on the duty paid in respect of capital goods while receiving the goods at their factory and then the eligible credit is continued to be allowed for taking credit in terms of Rule 4 of CENVAT credit rules. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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