CESTAT allows Cenvat Credit on Capital Goods Used for Both Dutiable and Exempted Products [Read Order]

The Kolkata bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) upheld the eligibility of Cenvat Credit on capital goods used for the manufacture of both dutiable and exempted products.

The revenue has appealed against the order of the adjudicating authority in which Cenvat Credit in capital goods has been allowed to the respondent.

When going to the facts of the case, it is to be noted that the Revenue denied the Cenvat Credit on capital goods claimed by the respondent  for the production of fertilizers, which are exempted goods.

The department was of the opinion that under Rule 6(4) of the Cenvat Credit Rules, 2004, the company was not entitled to claim Cenvat Credit since the capital goods were used for manufacturing exempted products.

The company contended that during the production of fertilizers, a by-product called phospho-gypsum, which is dutiable also emerged. The company had been clearing this by-product on payment of duty and claimed that the capital goods were used for both dutiable and exempted products.

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The adjudicatory authority reached a conclusion that the provisions of Rule 6(4) of Cenvat Credit Rule, 2004 was not applicable to the fact of this case as phospho-gypsum, a dutiable by-product, was produced using the same capital goods.

The revenue who was aggrieved by the above decision appealed before the CESTAT.

It was argued by the revenue that the main product, fertilizer, was exempted, and the emergence of the by-product was not verified at the time of availing the Cenvat Credit.

The bench found no merit in the Revenue’s appeal. The Tribunal noted that it was undisputed that the capital goods in question were used to produce phospho-gypsum, a dutiable product. Therefore, the denial of Cenvat Credit on these capital goods was unjustified, and the provisions of Rule 6(4) were not applicable in this case.

The CESTAT comprising of Ashok Jindal (Judicial Member) and Rajeev Tandon (Technical Member) dismissed the revenue’s appeal.

To Read the full text of the Order CLICK HERE

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