Cenvat credit allowable on Capital goods used initially in the manufacturing of exempted goods

Cenvat credit allowable on Capital goods used initially in the manufacturing of exempted goods but, at time of receipt, the Assessee had intention to use said Capital goods for manufacturing  of both dutiable as well as exempted goods

Brindavan Beverages Pvt. Ltd. (the Appellant) was engaged in manufacturing of Aerated waters which are dutiable and also Maaza, a Fruit pulp based drink which is fully exempted from Excise duty. During the period from September 2004 to August 2005, the Appellant installed certain machinery (Capital goods) in one of their plants, which was being used exclusively for manufacturing of Maaza which was fully exempt from Excise duty. Thereafter, the Appellant took Cenvat credit on the Capital goods which was denied by the Department in terms of Rule 6(4) of Cenvat Credit Rules, 2004on the ground that the capital goods were used exclusively in the manufacture of exempted goods.

The Hon’ble CESTAT, Delhi also upheld the contentions of the Department against which the Appellant filed an appeal before the Hon’ble High Court of Allahabad. The Hon’ble High Court set aside the Tribunal’s order and remanded the matter back to the Tribunal for fresh consideration.

In remand proceedings, the Hon’ble Tribunal observed thataccording to the Appellant at time of availing Cenvat credit, they had intention to use the capital goods for the manufacture of fruit pulp based soft drink (exempted goods) as well as for the manufacture of aerated waters (dutiable goods) and for this reason only, they had availed Cenvat credit on the Capital goods. Accordingly, the Hon’bleTribunalheld that:

• This aspect has to be verified on the basis of records of the Appellant and if the Appellant at the time of receipt of the Capital goods, 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 products as well as exempted final products or there is any other evidence indicating that at the time of receipt, the Appellant had plans to use the capital goods, in question, for manufacture of dutiable as well as exempted final products, they would be eligible for Cenvat credit;
• In this regard, the Appellant’s certificates certifying that the Capital goods can also manufacture aerated waters (Dutiable goods) after some minor adjustment and software change, may also be examined;
• 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 only for manufacture of the fruit pulp based drinks i.e. exempted final products and it is only subsequently they decided to switch over to manufacture of dutiable final products (aerated waters) then, in that event, Cenvat credit would not be allowed.

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