2011 (9) TMI 859 - AT - Central Excise

Waiver of pre deposit - Cenvat / MODVAT Credit - Removal of capital goods after use - Method of calculation of depreciation - Held that - Rule 3(5) required a manufacturer to pay an amount equal to the Cenvat credit demand on the capital goods reduced by 2.5% for each quarter of a year - any prima facie reasons to support the above observations of Commissioner (Appeals). There is nothing in the un-amended Rule 3(5) indicating that straight line method is not required to be accepted - Merely because such straight line method has been specifically mentioned in the subsequent Rule 3(5), it does not mean that the earlier rule was to the contrary, in the absence of the same. In fact, in our views, such subsequent amendment supports, the appellant s stand that such reduction was required to be done only on straight line method, as intended by the legislation and clarified subsequently by amendment in the law - As also on the issue of revenue neutrality in as much as the capital goods were cleared by the appellant to their sister concern only, who had availed the benefit of the credit of the duty paid by the appellant - Stay granted.

Summary

Issues: Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004; Prima facie reasons to support Commissioner (Appeals) observations; Time bar contention; Revenue neutrality issue.

In this judgment by the Appellate Tribunal CESTAT NEW DELHI, the issue revolved around the interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004. The appellants, engaged in manufacturing polyester chips, printing ink, and adhesives, availed Modvat credit for capital goods received in 1996. The dispute arose when the authorities alleged that the depreciation calculated at a flat rate of 2.5% was not in accordance with the rules. The show cause notice raised a differential demand, contending that the depreciation should have been calculated at 2.5% of the reduced value for each quarter, not using the straight-line method. The Commissioner (Appeals) referred to subsequent amendments clarifying the method of calculation. However, the Tribunal found no prima facie reasons to support this view, stating that the un-amended Rule 3(5) did not mandate the straight-line method explicitly.

Moreover, the Tribunal highlighted that the subsequent amendment supporting the straight-line method did not imply that the earlier rule was contrary, especially in the absence of such a provision. The Tribunal supported the appellant's argument that the reduction should be done only through the straight-line method, as intended by the legislation and clarified by the amendment. Additionally, the Tribunal agreed with the appellant's contention on the point of time bar and the issue of revenue neutrality. The capital goods were cleared to the appellant's sister concern, who had availed the benefit of the credit of the duty paid by the appellant. Based on these considerations, the Tribunal unconditionally allowed the stay petition, ruling in favor of the appellant.