ELIGITREAD (INDIA) LTD. Vs. CCE

JUDGEMENT

(1.) THE appellant -company is engaged in the manufacture of "Aluminium Matrices" (SH 8480.10) in their Kurichi factory, which are cleared, on payment of duty, to their Palghat and Pondicherry factories. The Pondicherry unit is the appellant in these appeals. During 2000 -01, the appellant -unit received 'aluminium matrices' (capital goods) from the Kuruchi unit and took CENVAT credit of 50% (Rs. 27,224/ -) of the duty paid thereon in terms of Rule 57AC(2)(a) of the Central Excise Rules, 1944. Subsequently, they removed the capital goods on payment of full duty (Rs. 54,448/ -) to another unit. Most of these removals were made in the same financial year (2000 -2001), there being one removal in April 2001. The appellant -unit took the balance 50% credit (Rs. 27,224/ -) in 2001 -02 in terms of Rule 57AC(2)(b). The lower authorities disallowed this credit of Rs. 27,224/ - to the assessee on the ground that the capital goods were not in the possession and use of the manufacture in the Pondicherry unit when the credit in question was taken. Hence appeal No. 751.

(2.) IN 2001 -02, the appellant -unit received capital goods from Kuruchi and took 50% (Rs. 25,539/ -) of the duty paid thereon in terms of Rule 4(2)(a) of the CENVAT Credit Rules, 2001. These capital goods were removed, in the same financial year, to another unit on payment of full duty (Rs. 51,078/ -). A minor quantity was removed likewise in the next financial year (2002 -03). The appellant took the balance 50% credit in terms of Rule 4(2)(b) of the CENVAT Credit Rules, 2001. The lower authorities disallowed this credit to the assessee on the same ground as above. Hence appeal No. 752/2004.

(3.) HEARD both sides. Ld.Counsel for the appellant argued that, as the unit to which the capital goods were removed by the Pondicherry unit on full payment of duty belonged to the appellant -company, the requirement of the goods having to be in the possession and use of the manufacturer of final products was fulfilled in this case and, therefore, it was not open to the department to deny the benefit of Rule 57AC(2)(b)/Rule 4(2)(b) ibid to the Pondicherry unit (appellant). Without prejudice to this argument, ld.Counsel submitted that, as the capital goods were removed from the appellant -unit on payment of full duty, availment of the balance 50% credit only resulted in a revenue -neutral situation and, therefore, it was not open to the Revenue to object to such availment of credit. Ld.SDR opposed these arguments by reiterating the findings recorded in the impugned order and by submitting that "possession and use" of capital goods as contemplated under Rule 57AC(2)(b)/Rule 4(2)(b) must necessarily be in the same factory in which the capital goods were received in terms of Rule 57AC(2)(a)/Rule 4(2)(a). After examining the relevant rules and considering the rival arguments, I am unable to accept the point made by ld.Counsel regarding "possession and use". Clause (a) and (b) of Sub -rule (2) of Rule 57AC read as under: