Friday, 10 July 2015

Utilisation of CENVAT credit on capital goods is allowed

Utilisation  of CENVAT credit   on  capital   goods is  allowed    to  the  extent   of  50%  in  financial year  of  receipt   and  balance   in  subsequent   financial  year, even  if capital  goods  are pending installation.
Assessee was a provider of port services and availed credit of duty paid on capital goods during the period F.Y.2006-07 and 2007-0B.   Department denied CENVAT credit on the grounds that capital goods were not installed. Department also disputed CENVAT credit of service tax paid by assessee under reverse charge on the ground that service tax paid u/s. 66A of the Act is not specified under Rule 3 of CCR,2004. Adjudicating Authority decided in favour of the assessee. Aggrieved department filed the appeal before the Tribunal
The Tribunal held that as per para 8 of CBEC Circular No. B-4/7/2000    TRU dated 03104/2000   in the case of capital goods, the CENVAT rules do not provide  installation  of capital goods as a pre-requisite for taking CENVAT credit. The credit can be taken as and when the capital goods are received  in the factory. The Tribunal  also observed that,  in terms  of CBEC  Circular  No. 267/26/2006-CX-8 dated  28-04-2006,  condition  of  installation  for  availing CENVAT  credit  on  capital  goods  was  effective  till  09-09-2004  and  not thereafter.  Relying upon the  decision of the Bombay  High Court in the case of CCE  vs.  Ispat Industries     Ltd.   2012  (275)  ELT   79  (Born)   which  held that, when the capital goods  are lying in the factory for installation  and process of erection  is being carried out, the  requirement  that the goods were  in the  possession and  use  of the  manufacturer  in the  year  in which  the balance credit was availed of can be said to have been fulfilled. Thus the credit on capital goods was allowed in the financial  year of receipt and balance  in subsequent financial  year. As regards dispute  on CENVAT credit of service  tax paid under  reverse charge,  it was  held that due  to  retrospective  amendment  under  sub  rule  (1) of Rule 3 of the Finance Act, 2011 service tax paid u/s. 66A.

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