2010 (12) TMI 584 - AT - Central Excise

Waiver of pre-deposit - Reversal of cenvat credit - Rule 3(5) of the Cenvat Credit Rules, 2004 - whether used capital goods could have been removed as such in June and July 2007 only upon reversal of cenvat credit that was availed by the appellants on purchase of the said capital goods - when the capital goods were removed as such from the factory by the appellants, they were required to pay an amount equal to the credit availed by them in respect of such capital goods. Once it is apparent that the appellants had not paid such amount, there was clear violation of the Rule in force at the relevant time Mere contention that on account of frequent changes in the provision of law, which itself is devoid of substance, cannot be a justification to avoid the penal liability resulting from failure to discharge the revenue liability by the assessee - the appeals and applications fail and are accordingly dismissed

Issues Involved:
1. Requirement for reversal of CENVAT credit on removal of used capital goods.
2. Applicability of Rule 3(5) and Rule 3(5A) of the CENVAT Credit Rules, 2004.
3. Validity of the department's demand for reversal of CENVAT credit, interest, and penalty.
4. Interpretation of the term "as such" in the context of removal of capital goods.
5. Relevance of prior judicial decisions and their applicability to the present case.

Detailed Analysis:

1. Requirement for Reversal of CENVAT Credit on Removal of Used Capital Goods:
The appellants, engaged in the manufacture of chewing tobacco, availed CENVAT credit on capital goods purchased between 2003 and 2005. These goods were removed in June and July 2007 without reversing the CENVAT credit availed. The department contended that this removal should have been accompanied by the reversal of the CENVAT credit as per Rule 3(5) of the CENVAT Credit Rules, 2004.

2. Applicability of Rule 3(5) and Rule 3(5A) of the CENVAT Credit Rules, 2004:
The department seized the capital goods but provisionally released them upon execution of a bond and a bank guarantee. A show cause notice was issued for the reversal of the CENVAT credit along with interest and penalty. The adjudicating authority confirmed this demand, leading to the present appeal. The core issue was whether the appellants were required to reverse the CENVAT credit on the removal of used capital goods under the prevailing rules.

3. Validity of the Department's Demand for Reversal of CENVAT Credit, Interest, and Penalty:
The appellants argued that the legal provisions at the relevant time did not necessitate the reversal of CENVAT credit for used capital goods. They cited various judicial pronouncements supporting their stance. However, the department maintained that Rule 3(5A), effective from 16-5-2005, mandated the payment of an amount equal to the credit availed upon removal of capital goods. The department also argued that the appellants' actions indicated a lack of bona fide, thereby justifying the imposition of penalty.

4. Interpretation of the Term "As Such" in the Context of Removal of Capital Goods:
The Tribunal noted that the provisions of law required payment of an amount equal to the credit availed when capital goods were removed "as such" from the factory. The Larger Bench in Modernova Plastyles Pvt. Ltd. v. Commissioner of C. Ex., Raigad clarified that the term "as such" included both used and unused capital goods. This interpretation was binding and rejected the appellants' contention that the rule applied only to unused capital goods.

5. Relevance of Prior Judicial Decisions and Their Applicability to the Present Case:
The appellants cited decisions in Madura Coats Pvt. Ltd., Cummins India Ltd., L.G. Balakrishnan & Bros., and Raghav Alloys (P) Ltd. The Tribunal held that these decisions were either not binding or not applicable, as they pertained to periods before the relevant amendments or were contrary to the Larger Bench's decision. The Tribunal also dismissed the relevance of the Supreme Court decisions in Maruti Suzuki Ltd. and Gujarat Narmada Fertilizers Co. Ltd., as they addressed different issues.

Conclusion:
The Tribunal concluded that the appellants were required to reverse the CENVAT credit availed on the capital goods at the time of their removal. The failure to do so constituted a violation of the rules, justifying the demand for reversal, interest, and penalty. The appeals and applications were dismissed, affirming the department's stance and the adjudicating authority's order.

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