Ford Wins ₹3.03-Crore Cenvat Dispute After CESTAT Finds Sanand Unit Later Eligible For Capital-Goods Credit

Ford India operated manufacturing units at Chennai and Sanand, both availing CENVAT credit under the CENVAT Credit Rules, 2004.

As a Large Taxpayer Unit, it transferred credit from the Sanand unit to Chennai under Rule 12A.

The dispute concerned credit of ₹3,03,86,410 relating to imported capital goods: the Revenue alleged that Sanand had taken credit before receiving the goods and transferred it to Chennai contrary to Rule 12A, as amended by Notification No. 21/2014-CE(NT).

Chennai reversed the transferred credit before the show-cause notice was issued; Sanand did not subsequently claim the disputed credit.

The Commissioner confirmed the demand against both units. Ford India appealed.

Rule 12A of the CENVAT Credit Rules, 2004, including its amendment by Notification No. 21/2014-CE(NT), governed the transfer of credit between registered premises of a Large Taxpayer Unit.

The Tribunal applied the principle that a procedural or premature availment does not, by itself, justify permanent denial of credit where the claimant is substantively eligible and the relevant tax payment and receipt conditions are satisfied.

Relying on Commissioner of Central Excise, Pune v. Satish Industries, 2013 (298) E.L.T. 188 (Bom.), it further held that taking credit in excess of the amount then available does not warrant denial where the excess credit was not utilised before the subsequent period in which the claimant became entitled to it.

The Tribunal also referred to Ad2Pro Global Creative Solutions Pvt. Ltd., India Cement Ltd., and Emerson Innovation Center, Pune in support of the treatment of premature availment as a procedural lapse in the circumstances considered.

The Tribunal found that Sanand was under construction during the relevant period and that the units were not disputing the underlying eligibility for the capital-goods credit once the relevant conditions were met.

Chennai had reversed the transferred credit before the show-cause notice, and Sanand had not taken that credit thereafter.

The Tribunal therefore treated the issue as premature availment, not substantive ineligibility.

It also noted that the Commissioner acknowledged Sanand’s entitlement to the balance credit in subsequent financial years; applying Satish Industries, the Tribunal considered that denial was unwarranted where the credit would become available subsequently and the record did not establish utilisation of the disputed credit in the earlier period.

It set aside the impugned Order-in-Original and allowed the appeal, with consequential benefits, if any, as per law.