HINDALCO INDUSTRIES LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) IN terms of the impugned Order -in -Appeal No. 394/2006 -C.E. dated 17 -8 -2006, the appellant is required to pre -deposit the duty amount of Rs. 1,23,999/ - and a penalty of Rs. 50,000/ - only.

(2.) THE learned Advocate, who appeared on behalf of the appellant, stated that, the appellants received capital goods in the years 2003 and 2003 -04. They availed 50% of the duty paid as Modvat credit under the prevailing Rules. However, in 2004 and 2005, they cleared the capital goods on payment of full duty. They realized that they had not taken credit prior to the removal of the capital goods, as they were rightly entitled for the balance 50% of the credit in terms of the Cenvat Credit Rules. Therefore, subsequent to the clearance of the capital goods, they availed the credit. Revenue proceeded against the appellants on the ground that, they could not have taken the credit of the balance 50% while they were not in possession of the capital goods. The learned SDR strongly urged that, a careful reading of the relevant Rules, namely, Rule 4(2)(b) would reveal that, there is a pre -condition for taking credit and that pre -condition is that, the appellant should be in possession of the capital goods at the time of taking credit. The learned Advocate drew our attention to the penultimate para of the impugned order, where the Commissioner (Appeals) has given a finding that, the violation is basically a procedural. On that account, he had also reduced the penalty to Rs. 50,000/ -.

(3.) ON a very careful consideration of the matter, we find that, as per Rule 4(2)(b) of the Cenvat Credit Rules, 2002, the balance of the Cenvat credit may be taken in any financial year subsequent to the financial year in which the capital goods were received in the factory of the manufacturer, if the capital goods, other than components, spares and accessories, refractory and refractory materials and goods falling under Heading No. 68.02 and sub -heading No. 6810.10 of the First Schedule to the Tariff Act, in possession and use of the manufacture of final products in such subsequent years. In the present case, when the capital goods were received, the appellants were rightly in possession of the duty paying documents and they availed the eligible credit of 50%. In terms of the Rules, the balance 50% of the credit can be taken in any financial year subsequent to the financial year in which the capital goods were received. The condition is that, in the financial year, in which they take credit, the capital goods should be in the possession and use of the manufacturer. It is not in dispute that, 2004 -05, which is the year, in which the credit was taken, was subsequent to the year in which the goods were received. Moreover, in that financial year, the appellant were actually in possession of the capital goods and they also used the same. The only point of the Revenue is that, at the time of taking credit, they were not in possession of the capital goods. In the relevant Rule, nowhere it is stated that, while the credit is taken, the appellant should be in possession of the capital goods. In any case, the appellants are rightly entitled for the credit and while clearing the capital goods they had paid full duty. In such circumstances, the demand of duty and denial of credit is not justified. The appellants have, prima facie, a strong case in their favour and we order full waiver of duty demand and penalty imposed, till the disposal of the appeal. The stay application is accordingly allowed. The appeal will come up for final hearing in its due course.