ACE TIMEZ Vs. COMMISSIONER OF CENTRAL EXCISE, BANGALORE

JUDGEMENT

(1.) SHRI Muthu Venkataraman, learned Advocate appearing for the appellants pleaded that appellants are manufacturers of plastic watch boxes, wire retainers coil fixture etc., falling under sub -heading 3923.90 of Central Excise Tariff. The appellants received capital goods during the period from April to September 2000. The appellants instead of taking the credit of 50% of the duty paid on capital goods filed application for Modvat credit only on 1 -4 -2001 i.e. in the next financial year. Dy Commissioner had allowed 50% of the credit to the appellants and disallowed 50% of the credit which was not availed by them during the financial year in which goods were received. Appeal filed by them was rejected by the Commissioner (Appeals) on the ground that as per Rule 4(2)(a) of Cenvat Credit Rules, 2001 credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. He pleaded the Commissioner (Appeals) has wrongly interpreted Rule 4(2)(a) as according to these rules, the balance 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 manufacturer. He pleaded that in the year 2000 -2001 they were not under the Modvat credit scheme as they were availing exemption under Notification No. 8/2001 and had not paid during the financial year 2000 -2001. They opted for Cenvat from financial year 2001 -2002 and immediately on 1 -4 -2001 they took 50% of credit. They stated that since the capital goods were received by them when they were under exemption therefore the first opportunity for them to claim Cenvat credit was 1st April, 2001 when they opted to pay duty. Accordingly they took credit of 50% of the duty paid on the capital goods. They pleaded that the Rule 4(2)(a) does not prohibit them from taking the credit in subsequent year when they have not taken any credit in the year on receipt of the capital goods. The restriction is that they can take credit up to 50% of the duty paid on capital goods during the financial year when the capital goods were received. It does not mean that they necessarily should take 50% of the credit. The language in the rule is up to 50%. It means, they can take credit from 0% to 50% and balance in the succeeding financial year. Since they have not taken any credit in the year when the capital goods were received, they can take the entire credit in the next financial year or they can take 50% credit in the next financial year when they become eligible for the credit of Rs. 50% and balance in subsequent year. However, the department has denied the 50% of credit to them which is illegal. He relied on the decision of the Tribunal in the case of -

(2.) SHRI B.R. Jagadish learned JDR appearing for the revenue reiterated the stand taken by the Commissioner (Appeals).

(3.) WE have carefully considered the submission made by both the sides. We find that in this case, the appellants had received the capital goods during the year 2000 -2001. However they could not take any credit on the capital goods as they were working under exemption. However from 1 -4 -2001, they started paying duty and opted for the Cenvat Credit Scheme. Therefore they are eligible to take credit of duty on the capital goods during the year 2001 -2002. Under Rule 57AC(2)(a) at the relevant time, the provision was that the Cenvat credit in respect of capital goods received in a factory at any point of time in a given financial year shall be taken only for an amount not exceeding 50% of the duty paid on such capital goods in the same financial year. The Rule 57AC(2)(b) of the Central Excise Rules provides that balance of Cenvat credit may be taken in any financial year subsequent to the financial year in which capital goods were received in the factory of the manufacturer. We find that corresponding provisions are made in Rule 4(2)(a) and (b) of Cenvat Rules, 2002. We find that these provisions do not deny credit, if it is not taken in the same financial year in which the capital goods were received. It only restricts that in the financial year in which capital goods were received, the credit not exceeding 50% of duty paid on such capital goods can be taken as credit in that financial year. Therefore, denial of 50% credit to the appellants on the ground that they had not taken the same in the same financial year in which the capital goods were received is contrary to the Rules. The rules do not provide that if 50% credit is not taken in the same financial year in which capital goods were received, then it will lapse. We, therefore, allow the appeal and direct that 50% credit denied to the appellants should be allowed to them. The appeal is disposed of in the above terms.