By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether CENVAT credit of excise duty paid on capital goods i. e., cylinders can be claimed even if such cylinders were moved temporarily out of factory for the purpose of refilling of gas? Held, yes.
Facts:
Assessee purchased cylinders for storage of hydrogen gas used in the manufacture of various chemicals. The gas is procured from various suppliers, and the empty cylinders have to move out from the factory for refilling of gas. The said cylinders were installed on hired vehicles for ease of their use, movement within the factory and transportation from factory to gas supplier’s premises. Assessee claimed CENVAT credit of excise duty paid on such cylinders being capital goods used for the purpose of manufacture. Denying the same, revenue contended that the cylinders were not installed within factory and procedure under Rule 3(5) relating to reversal and recredit was not followed although such capital goods were removed outside factory.
Held:
It was held that, the only condition for availing CENVAT on capital goods as per Rule 2(a)(A) of CENVAT CREDIT Rules, 2004 is that it must be used in the factory of the manufacturer of final product. There is no such requirement for the capital goods to be installed in the factory. The Tribunal observed that, it was not disputed that the cylinders are not capital goods and it was evident that the gas cylinders were used within the respondent’s factory although cylinders move out temporarily from the factory for the purpose of refilling of the gas. Therefore, it held that, the requirement of use of capital goods within the appellant’s factory in terms of the said Rule 2(a)(A) is fulfilled and credit cannot be denied. It further held that, the temporary to and fro movement of cylinders for the purpose of refilling of the gas is otherwise covered by Rule 4(5)(a) of the CENVAT Credit Rules, 2004.
