SRI KRISHNA ALLOYS Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE lower authorities disallowed capital goods credit to the appellants in respect of moulds and dies for the period 2001 -02. The assessee had taken 50% of the duty paid on the moulds and dies, in the previous financial year 2000 -2001, which was in accordance with Rule 57AC(2)(a) of Central Excise Rules, 1944. The remaining 50% of the Cenvat credit on the moulds and dies was taken on 1 -4 -2001, in the financial year 2001 -2002, during which period the moulds and dies were no longer in existence, the same having been destroyed in the course of use thereof for the manufacture of final product in the previous financial year. The lower authorities disallowed this balance credit to the assessee on the ground that the capital goods (moulds and dies) were not in their possession and use during the period of dispute (2001 -2002). In other words, the assessee was found not to have fulfilled the condition of "possession and use" laid down in Rule 57AC(2)(b). Hence this appeal.

(2.) LEARNED Counsel submits that the amendments brought to the relevant rule, by Notification 70/03 -C.E. (N.T.), dated 15 -9 -2003, are clarificatory and retrospective as could be seen from the tenor of the Board's Circular No. 755/71/2003, dated 13 -10 -2003. What the learned Counsel referred to is the amendment brought to Rule 4(2)(b) of the Cenvat credit Rules, 2002 as also the Board's Circular issued in clarification thereof. According to Rule 4(2)(b) as so amended, the balance 50% of Cenvat Credit on moulds and dies could be taken in the subsequent financial year without any requirement of the capital goods having to be in the possession and use of the manufacturer in such subsequent year. Clarifying the amended provisions, the CBEC, in the Circular referred to above, stated as under : Certain other changes in Central Excise Rules, 2002 and Cenvat Credit Rules, 2002 have been carried out which may be gone through. Now the Export -Oriented Units shall also be required to give the details of the goods manufactured and exported under bond as well as the inputs and capital goods received without payment of duty in the monthly return filed by them. Prior to this amendment, Sub -rule (2)(b) of Rule 4 of Cenvat Credit Rules, 2002 provided taking of balance of 50% Cenvat Credit in a financial year if the capital goods are in possession and use of the manufacturer of final products in such financial year subsequent to the year of acquisition. It was represented that this condition of possession and use could not be satisfied at times in respect of mould and dies. The representations were considered and Sub -rule (2)(b) of Rule 4 of Cenvat Credit Rules, 2002 has been amended to allow credit in respect of the balance 50% of the duty on Moulds and Dies in a subsequent financial year even if the conditions of these goods being in the possession and use of the manufacturer of financial products in such subsequent year is not fulfilled. In other words, the balance 50% credit may be taken by the manufacturer of final products for Moulds and Dies in a subsequent financial year when these goods have been used for the manufacturer of final products but no longer available in such subsequent financial year. It appears from the above clarification that what was contemplated by the Board was that, prior to the amendment, Rule (4)(2)(b) of the Cenvat Credit Rules, 2002 provided for taking of balance of 50% Cenvat Credit in any financial year, if the capital goods were in possession and use of the manufacturer in such financial year subsequent to the year of acquisition. The Board, further, clarified that the Rule was amended to allow credit in respect of balance of 50% on moulds and dies in subsequent financial year even if the condition of these goods having to be in the possession and use of the manufacturer of the final product in such subsequent year was not fulfilled. This clarification ex facie would rule out retrospective effect of the amendment. I have also seen the earlier Circular of the Board bearing No. 747/63/2003 -CX., dated 22 -9 -2003 produced by the learned SDR. This was the circular which was further clarified as above and hence I need not read this Circular. The CBEC themselves did not contemplate retrospective effect of the amendment brought to Rule 4(2)(b) of the Cenvat Credit Rules, 2002. Hence there is no question of the amended provision of this Rule being read into the erstwhile Rule 57AC, clause (b) of Sub -rule (2) of which stipulated that the capital goods in respect of which 50% Cenvat Credit has been taken in the financial year in which the goods were acquired by the manufacturer of final product should still be in the possession and use of the manufacturer in the subsequent financial year during which the balance 50% credit is sought to be taken. There is no dispute regarding the status of moulds and dies, which are admittedly capital goods. Clause (b) of Sub -rule (2) of Rule 57AC clearly covers the subject matter of this appeal. Admittedly, the capital goods as such were not in the possession and use of the manufacturer in 2001 -2002 when the 50% balance credit in question was taken. Hence as rightly held by the lower authorities, the assessee was not entitled to take balance 50% of Cenvat credit on the moulds and dies in question.

(3.) PERHAPS , an analogy could be drawn between the facts of this case and the factual situation contemplated in the proviso to Sub -rule 2(a) of Rule 4 of the Cenvat credit rules. Rule 4(2)(a) lays down that up to 50% of Cenvat credit on capital goods received in the factory in a given financial year could be taken in the same year. The proviso reads as under: provided that CENVAT Credit in respect of capital goods shall be allowed for whole amount of duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year. On account of destruction, in use, of the moulds and dies in 2000 -2001, the moulds and dies as such did not exist with the assessee in the subsequent period. Perhaps such non -existence of moulds and dies beyond the financial year in which the goods were acquired by the assessee could be taken as analogous to the case of clearance of capital goods as such in the same financial year. If that be so, 100% Cenvat credit could have been taken in 2000 -2001 itself, going by the above analogy. However, the assessee never thought of availing Cenvat credit on the moulds and dies in this manner. They have been carried away by the "50% scheme."