By TIOL News Service

NEW DELHI, OCT 30, 2014: THE appellant are engaged in manufactured of Aerated waters which are dutiable and also Maaza, a Fruit pulp based drink which is fully exempted from duty. During the period from September 2004 to August 2005, the appellant installed certain machinery in one of their plants, which was being used exclusively for manufacture of MAAZA which was fully exempt from duty. In respect of this machinery, they took capital goods Cenvat credit. Department denied the credit on the ground that the capital goods were used exclusively in the manufacture of exempted goods, in terms of Rule 6(4) of CENVAT Credit Rules, 2004.

The Tribunal also dismissed the appeal vide final order No. 231/2008-EX dated 01/05/08 - 2008-TIOL-2604-CESTAT-DEL. Against this order of the Tribunal, the appellant filed appeal before Allahabad High Court under Section 35G of Central Excise Act, 1944. The High Court set aside the Tribunal's order and remanded the matter back to the Tribunal for fresh consideration on the ground that while the Tribunal has denied the benefit of capital goods Cenvat credit on the ground that the certificate of the manufacturer of the machinery, relied upon by the appellant, also confirms that the plant is usable for manufacture of aerated waters only after modification, the perusal of the manufacturer's certificate shows that the machinery, in question, installed and operating at their plant, is designed to handle carborated/ aerated waters also after software changes and minor adjustment.

In remand proceedings, after considering the submissions by both sides, the Tribunal held:

In the present case the capital goods had been received during period from September 2004 to August 2005 when the Cenvat credit had been taken and according to the appellant at that time, they had intention to use these goods for the manufacture of fruit pulp based soft drink (exempted goods) as well as for manufacture of aerated waters (dutiable goods) and for this reason only, they had availed capital goods Cenvat credit, while initially using the machinery only for manufacture for the exempted final product. This aspect has to be verified on the basis of records. If the appellant at the time of receipt of the capital goods during September 2004 to August 2005 period, had filed any declaration to the Department or had sent some letter to the Department intimating that they would be using this machinery for manufacture of dutiable final product (aerated waters) as well as exempted final product (the fruit pulp based soft drinks), or there is any other evidence indicating that at the time of receipt, the appellant had plans to use the machinery, in question, for manufacture of dutiable as well as exempted final products, they would be eligible for Cenvat credit.

In this regard, as per the directions of Allahabad High Court in its order dated 24/2/14, the manufacturer's certificates certifying that the machinery, in question, can also manufacture Aerated waters after some minor adjustment and software change, may also be examined. But if there is no such evidence, it would have to be presumed that at the time of receipt, they had plans to use the capital goods, in question, only for manufacture of the fruit pulp based soft drinks (exempted final product) and it is only subsequently they decided to switch over to manufacture of dutiable final product (aerated waters) and in that event, in accordance with the Tribunal's judgment in case of Surya Roshni Ltd - 2003-TIOL-277-CESTAT-DEL and Spenta International Ltd - 2007-TIOL-1089-CESTAT-MUM-LB, they would not be eligible for Cenvat credit.

Accordingly, the Tribunal remanded the matter to the Commissioner for de novo adjudication.

(See 2014-TIOL-2136-CESTAT-DEL)