ORDER
Chittaranjan Satapathy, Member (T)
1. Heard both sides. The appellants received capital goods in their factory on 17.12.2000 and 11.12.2000 and started production on 30.9.01. After crossing the small scale exemption limit, they started paying duty from January, 2002 and availed the entire credit of duty paid on the capital goods. The lower appellate authority has restricted the credit to 50%. Hence this appeal.
2. The ld. DR, Shri P.K. Das, who has incidentally passed the impugned order-in-original, supports the order of the lower appellate authority. He states that Rule 4(2)(a) of the Cenvat Credit Rules, 2002, restricts the credit to an amount not exceeding 50% of the duty paid on capital goods. According to the ld. DR, under Rule 4(2)(b) of the Cenvat Credit Rules, 2002, only the balance amount of 50% credit can be taken in the subsequent year. In view of the fact that the capital goods were received in the year 2000-2001, the appellants were eligible for 50% credit during that year and the remaining 50% credit in the year 2001-2002 and hence according to the ld. DR, they are not eligible to take 100% of the capital goods duty credit in the second year i.e. 2001-2002.
3. Heard the ld. Advocate for the appellants.
4. The intention behind the Rule 4(2)(a) of the Cenvat Credit Rules, 2002, is very clear. It does not allow to a manufacturer the entire duty credit in the first year, in which the capital goods are received and the credit is restricted to an amount not exceeding 50%. In view of the fact that there is a maximum limit of 50%, a manufacturer has the liberty to utilize any amount of credit below that percentage or not avail any credit at all in the first Financial Year. Rule (2)(b) allows a manufacturer to take the balance of the CENVAT Credit in the second Financial Year. It does not restrict the percentage of the credit that can be taken in the second year. For example, if a manufacturer avails 30% of the credit in the first Financial year under Rule 4(2)(a), he will be eligible for taking the balance 70% of the credit in the second Financial year as there is no restriction under the said Rule 4 (2)(b). In the instant case, the appellants could not utilize any credit during the first Financial year as it took time for installation of the machinery and to start production, which could be done in the second Financial year. Therefore, in their case, the balance credit was the entire amount of credit they having not utilized any credit in the first Financial year. As such, in the absence of any restriction regarding utilization of the balance credit in the second Financial year under Rule 4(2)(b), the appellants are entitled for availing of the entire credit of the duty paid on capital goods in the second Financial year.
5. In view of my findings as above, the impugned order is set aside and the appeal is allowed with consequential benefit to the appellants.
Dictated and pronounced in the open Court.