2013 (9) TMI 212 - AT - Central Excise

Cenvat Credit - Removal of Capital Goods removed Rule 3(5) of the CENVAT CREDIT Rules, 2004 Held that - The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty - The machines which are cleared after utilization cannot be treated as machines cleared as such. With effect from 13-11-2007, a proviso has been added to Rule 3(5) of the Cenvat Credit Rules providing that if the capital goods on which Cenvat credit has been taken are removed after being used, the manufacturer shall pay the amount equal to Cenvat Credit taken on the said capital goods reduced by 2.5% for each quarter of year or part thereof from the date of taking the Cenvat Credit Board s Circular dated 1-7-2002 clarified that in the case of clearance of goods after being put into use, the value shall be determined after allowing the benefit to depreciation as per rates fixed - The machine cleared after putting into use for nine years cannot be treated as Cleared as such Decided in favor of Assessee.

Summary

Issues:
1. Availment of credit on capital goods without paying Central Excise duty.
2. Requirement to reverse CENVAT Credit on clearance of capital goods.
3. Interpretation of Rule 3(5) of CENVAT Credit Rules, 2004.
4. Applicability of High Court judgments on similar cases.

Analysis:
1. The appellant availed credit on forklifts as capital goods in 2000/2001, later cleared them in 2007 without paying Central Excise duty or reversing the credit. The department issued a show cause notice demanding Rs.1,79,075 along with interest and penalty.

2. The dispute centered around Rule 3(5) of CENVAT Credit Rules, 2004, which required the reversal of CENVAT Credit on clearance of capital goods. The lower authorities held that the appellant should have reversed the credit when the forklifts were received, contrary to the appellant's argument that they were scrapped after use.

3. The Tribunal analyzed the issue and referred to the judgment of the Hon'ble High Court of Punjab & Haryana in a similar case, Raghav Alloys Ltd, where it was held in favor of the assessee. The Tribunal emphasized the distinction between capital goods cleared after use and those cleared without use, citing relevant legal provisions and circulars.

4. The Tribunal concurred with the appellant's argument, citing the High Court's ruling and emphasizing that the purpose of CENVAT Credit on capital goods is to prevent duty cascading. The Tribunal highlighted the difference between capital goods cleared as such and those cleared after utilization, ultimately setting aside the impugned order and allowing the appeal in favor of the appellant.