Custom, Excise & Service Tax Tribunal
Bharat Petroleum Corporation Ltd vs Commissioner Of Central Excise, ... on 16 January, 2012
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI LARGER BENCH APPEAL No. E/238/05 (Arising out of Order-in-Original No. 24/2004 dated 1.11.2004 passed by Commissioner of Central Excise, Mumbai-II) For approval and signature: Honble Mr. S.S. Kang, Vice President Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Bharat Petroleum Corporation Ltd. Appellant Vs. Commissioner of Central Excise, Mumbai-II Respondent Appearance:
Shri Bharat Raichandani with Ms. Anjali Hirawat, Advocates, for appellant Shri B.R. Tripathi, Chief Commissioner (AR), for respondent CORAM:
Honble Mr. S.S. Kang, Vice President Honble Mr. Ashok Jindal, Member (Judicial) Honble Mr. P.R. Chandrasekharan, Member (Technical) Date of Hearing: 9.11.2011 Date of Decision: 16.1.2012 ORDER NO Per: S.S. Kang Heard both sides.
2. The Referral Bench has referred the following question of law to the Larger Bench:-
Whether an assessee is eligible to avail the credit of balance 50% of the amount of duty paid on the capital goods in the subsequent financial year, without installing the same and putting it into use as held by Ispat Industries (supra) case or the said assessee cannot avail the credit, as held by Parasrampuria Synthetics (supra) case.
3. In the present case, the dispute is for the period 2003-2004. The relevant provisions of Rule 4(2)(a) & (b) of the Cenvat Credit Rules, 2002 are reproduced below:-
4. Conditions for allowing CENVAT credit.-
(1) The CENVAT credit in respect of inputs may be taken immediately on receipt of the inputs in the factory of the manufacturer:
Provided that in respect of final products falling under Chapter 61 or 62 of the First Schedule to the Tariff Act, the CENVAT credit of duty paid on inputs may be taken immediately on receipt of such inputs in the registered premises of the person who gets such final products manufactured on his account on job work subject to the condition that such inputs are used in the manufacture of such final products by the job worker.
(2) (a) 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 fifty per cent. of the duty paid on such capital goods in the same financial year:
Provided that the CENVAT credit in respect of capital goods shall be allowed for the whole amount of the duty paid on such capital goods in the same financial year if the said capital goods are cleared as such in the same financial year.
(b) The balance of 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, refractories and refractory materials and goods falling under heading No. 68.02 and sub-heading No. 6801.10 of the First Schedule to the Tariff Act, are in the possession and use of the manufacturer of final products in such subsequent years.
4. The issue involved in this case is the interpretation of the provisions as contained under Rule 4(2)(b) of the Cenvat Credit Rules which provide that the balance of 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, refractories and refractory materials and goods falling under heading No.68.02 and sub-heading No.6801.10 of the Tariff, are in the possession and use of the manufacture of final products in such subsequent years.
5. The issue referred to the Larger Bench is interpretation of the expression used in the Rule i.e. possession and use of the manufacturer of final products, which is the condition for availing credit of balance 50% in the subsequent years as provided under the Rules.
6. In the case of Parasrampuria Synthetics vs. CCE, Jaipur reported in 2004 (170) ELT 327 (Tri.-Del.), the Tribunal took a view that the balance 50% of cenvat credit can be taken by a manufacturer in case the capital goods were in use of the manufacture of final product and in that case as the capital goods were not installed/used by the manufacturer hence the balance credit of 50% was denied.
7. We find that as the capital goods were not installed in the factory and in absence of contention, that process of installation was being carried out, the Tribunal rightly disallowed the credit of remaining 50% of duty paid on capital goods, availed by the assessee in that case.
8. In another case of Ispat Industries Ltd. vs. CCE, Raigad reported in 2006 (199) ELT 509 (Tri.-Mumbai), the Tribunal held that in case the capital goods were at the stage of erection in the plant, the credit of 50% cannot be denied on the ground that the capital goods were not put to use.
9. The Revenue filed appeal before the Honble Bombay High Court and the Honble Bombay High Court vide order dated 7.6.2011 held as under:-
2 Rule 4(2)(b) of the Cenvat Credit Rules as it stood at the material time provided as follows :
The balance of 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, refractories and refractory materials and goods falling under heading No.68.02 and subheading No.6801.10 of the First Schedule to the Tariff Act are in the possession and use of the manufacturer of final products in such subsequent years. 3 In the present case, it is not in dispute that the assessee received capital goods for the Hot Strip Mill-Phase II project during the year 200102 and in terms of the provisions of Rule 4(2) availed of fifty percent of the duty paid on the capital goods as credit. The balance of fifty percent was availed of in the subsequent financial year, 200203. According to the Revenue, the assessee was not entitled to avail of the balance fifty percent credit during the year 200203 since the capital goods were still at the stage of erection and had not actually been put to use. From the order of the Commissioner, it appears that the finding of the Commissioner is that the availment of the credit was premature.
4 The Tribunal has held that the expression possession and use of the manufacturer of final products have to be read together and would denote that the goods were available for use in the manufacture of the final products. In the present case, there is a finding of fact that the capital goods were lying in the factory for installation and the process of erection was being carried out. In this view of the matter, the requirement that the goods were in the possession and use of the manufacturer in the year in which the balance of credit was availed of has been fulfilled. In this factual background, we are of the view that no substantial questions of law would arise. The interpretation which has been placed by the Tribunal on Rule 4(2)(b) would, in these facts, not give rise to a substantial question of law. The issue of limitation therefore is also of no practical relevance. The Appeal is accordingly dismissed. There shall be no order as to costs.
10. In view of the above decision of the Honble Bombay High Court in Central Excise Appeal No.139 of 2008 (CCE vs. Ispat Industries Ltd.) order dated 7.6.2011, question referred to the Larger Bench is answered as under:-
The condition imposed under the relevant Cenvat Credit Rules, for taking credit of balance of 50% of amount of duty on capital goods in subsequent financial years, in case the capital goods are lying in the factory for installation and the process of erection was being carried out has to be considered as the capital goods were in possession and use for manufacture.
12. The matter be placed before the Division Bench to decide the appeal on merits.
(Pronounced in Court on 16.1.2012) (S.S. Kang) Vice President (Ashok Jindal) Member (Judicial) (P.R. Chandrasekharan) Member (Technical) tvu 1 6