By TIOL News Service

MUMBAI, JUNE 30, 2015: THE appellant had availed CENVAT credit of 50% of duty paid on C.I. Moulds treating the same as capital goods at the time of receipt and subsequent 50% credit was availed in the subsequent financial year. During use in the manufacture,the moulds got defective and become waste and the same was cleared from the factory as waste and scrap.

Revenue's contention is that in terms of Rule 4(2)(b) of CCR, 2002 the balance of 50% of the credit can be taken only when the capital goods on which the credit is taken remains in possession and use with the appellant. Since capital goods i.e. C.I. Moulds were neither available with the appellant nor was in use, therefore, appellant was not entitled for balance 50% credit in the subsequent financial year.

SCN came to be issued for recovery of the CENVAT credit so availed of Rs.1,57,008/- and the same was confirmed and penalty of Rs.20,000/- was imposed along with interest.

As the o-in-o was upheld by the Commissioner(A) by his order dated 18/10/2004, the appellant filed an appeal before the CESTAT.

When the matter came up for hearing recently the appellant was not represented.

The AR reiterated the findings of the lower authority and also invited the attention of the Bench to the Board Circular No. 747/63/2003-CX dated 22/9/2003 wherein it is clarified that - It may also be noted that full CENVAT credit of the duty paid on Moulds and Dies shall now be available to the manufacturer in the first year of acquisition itself. However credit on the moulds and dies received in the factory already before this amendment may be allowed as per the provisions existing earlier.

Inasmuch as since prior to the amendment of Rule 4(2)(b) of CCR, 2002 the balance credit in respect of capital goods i.e. moulds and dies were allowable only if the capital goods is in possession and use with the manufacturer, the credit has been rightly denied. Reliance is also placed on the decision in Silver Ispat (P) Ltd. - 2008-TIOL-1467-CESTAT-MUM.

The Bench extracted the rule 4(2)(b) of CCR, 2002 as it existed during the material period and concluded that it was clear that balance 50% Credit could be taken only in case where such capital goods is in possession of the assessee and also in use; that since at the time of taking remaining 50% credit, moulds were not available with the appellant, Cenvat credit of remaining 50% was correctly disallowed.

Observing that the legal position was made clear in the decision cited by the AR and the Board Circular, the CESTAT held that the appellant was not entitled for Cenvat Credit to the extent of remaining 50%.

The order was upheld and the appeal was dismissed.

(See 2015-TIOL-1275-CESTAT-MUM)