2008 (5) TMI 552 - AT - Central Excise

Demand - Cenvat/Modvat credit - Capital goods removed as such - Held that - Rule 3(4) of the Rules provides that when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined on such goods under sub-Section (2) of Section 3 or Section 4 or Section 4A of the Act, as the case may be - respondent did not clear the capital goods, as such and therefore Rule 3(4) of the Rules cannot be invoked - appeal dismissed - decided against Revenue.

Summary

Issues: Alleged duty evasion on old and used machinery, applicability of Rule 3(4) of Cenvat Credit Rules, 2002, interpretation of "as such" in capital goods removal.

In this case, the Appellate Tribunal CESTAT, New Delhi addressed the issue of alleged duty evasion by the Respondent concerning the clearance of old and used machinery. The Respondent had cleared a complete lamination plant and looms, availing credit on them during specific periods. The Revenue contended that Rule 3(4) of the Cenvat Credit Rules, 2002 should apply as the complete machine was cleared. The Tribunal considered the arguments presented by both sides. The learned DR for the Revenue emphasized that duty should be paid when capital goods are removed as such. However, the advocate for the Respondent relied on previous Tribunal decisions to support their case. The Tribunal analyzed the show cause notice and highlighted that the Respondent did not clear the capital goods as such, as they were old and used. Referring to the interpretation of "as such," the Tribunal concluded that Rule 3(4) could not be invoked in this scenario. Therefore, the appeal filed by the Revenue was rejected, and the decision of the Commissioner (Appeals) in favor of the Respondent was upheld.

This judgment clarifies the application of Rule 3(4) of the Cenvat Credit Rules, 2002 in cases involving the removal of old and used capital goods. It emphasizes the distinction between clearing goods as such and removing them after use. The Tribunal's interpretation of the term "as such" plays a crucial role in determining the obligation to pay duty on such removals. The reliance on previous Tribunal decisions adds weight to the Respondent's argument, highlighting consistency in legal interpretation. The judgment underscores the importance of factual analysis in determining the applicability of specific rules and regulations in excise matters.

Furthermore, the Tribunal's detailed analysis of the show cause notice and the timeline of events surrounding the receipt and clearance of capital goods provides a comprehensive overview of the case. By examining the nature of the machinery cleared and the period of its usage, the Tribunal was able to ascertain that the goods were old and used, not cleared as new. This distinction was pivotal in determining the outcome of the appeal and reaffirming the decision in favor of the Respondent. The judgment serves as a precedent for similar cases involving the interpretation of rules governing the clearance of capital goods in the excise context, offering clarity on the legal principles involved.