2004 (4) TMI 517 - AT - Central Excise

Demand of differential duty on capital goods - penalty and interest u/s 11AB - Used capital goods - Limitation - HELD THAT - The appellants have removed used capital goods after applying depreciation as provided in the erstwhile Rule 57S(2) in respect of the machine removed on 11-2-2002 when the legal provisions required that they pay duty on the transaction value. They removed the remaining goods on payment of duty on transaction value when the relevant rules had changed requiring them to reverse the credit originally availed. In this context the definition of the expression capital goods removed as such interpreted by the Bangalore Bench of the Tribunal is relevant. According to the Hon ble Tribunal used capital goods are not covered by Rule 3(4) of Cenvat Credit Rules 2001/2002. Therefore the appellants argument that they are not required to pay even the duty they paid carries considerable force. Moreover it is difficult to deny the assertion that the SCN was issued in this case much beyond the normal period with no grounds to justify invocation of larger period. Therefore the proceedings initiated with the SCN dated 30-8-2004 are not sustainable. Accordingly I set aside the impugned order and allow the appeal.

Summary

Issues involved: Appeal against demand of differential duty on capital goods, penalty, and interest u/s 11AB of the Central Excise Act, 1944.

Summary:
1. The appeal was filed against the Commissioner (Appeals), Salem's order upholding the demand of differential duty on capital goods, penalty, and interest. The appellant had removed used textile machinery on different dates and paid duty based on different valuation methods.

2. The relevant Rule 3(4) of Cenvat Credit Rules, 2000 required payment of duty on capital goods removed from the factory. Subsequently, the rule was amended to require reversal of credit availed on such goods.

3. Proceedings were initiated to recover the differential duty based on the differing rules applicable during the material periods.

4. The appellant argued that the provisions applied to 'capital goods as such' and not 'used capital goods', citing relevant rules and a Tribunal decision supporting their position.

5. The appellant contended that the show cause notice (SCN) issued was time-barred as the department was aware of the removals and duty payments.

6. The respondent argued in favor of sustaining the demand, penalty, and interest, referencing a Tribunal decision regarding reversal of credit on capital goods removal.

7. The Tribunal considered the arguments and ruled in favor of the appellant, stating that the rules did not apply to 'used capital goods' and the SCN was issued beyond the normal period, rendering the proceedings unsustainable. The impugned order was set aside, and the appeal was allowed.