2014 (7) TMI 67 - AT - Central Excise

CENVAT Credit - Capital goods - removal as such - reversal of credit - Held that - It is an admitted fact that at the time of procurement of capital goods the respondent has not taken the CENVAT credit at all. Therefore, as per the Rule 3(5) of CENVAT Credit Rules, 2004 an assessee is required to reverse the CENVAT credit taken on clearance of the input/capital goods as such . Admittedly, in this case when the respondent has not taken CENVAT credit therefore, they are not required to reverse any credit on these capital goods. In this set of facts, issuance of show-cause notice was not required at all. Therefore, all the proceedings initiated in the show-cause notice are set aside. In these circumstances, I do not find any infirmity with the impugned order and the same is upheld - Decided against Revenue.

Summary

Issues:
- Appeal against impugned order
- Allegation of clearance of capital goods without payment of duty
- Denial of CENVAT credit
- Adjudication order confirming duty demand, interest, and penalty
- Challenge before Commissioner (Appeals)
- Interpretation of CENVAT Credit Rules, 2004
- Requirement to reverse CENVAT credit
- Show-cause notice necessity

Analysis:
The judgment pertains to an appeal against an impugned order where the Revenue challenged the clearance of certain capital goods without payment of duty by the respondent. The investigation revealed that the goods were cleared without duty payment, leading to the initiation of proceedings to demand duty, interest, and penalty. Additionally, it was observed that the respondent did not initially take CENVAT credit on these goods but claimed it later. The adjudication order confirmed the duty demand and denied the CENVAT credit taken post-clearance. Subsequently, the respondent appealed before the Commissioner (Appeals) who set aside the adjudication order, prompting the Revenue to appeal further.

During the hearing, the Revenue contended that the respondent cleared the goods "as such" without duty payment, necessitating duty payment and penalty under Section 11AC of the Act. Conversely, the respondent's consultant supported the impugned order. The Tribunal considered both sides' arguments and noted that the respondent did not avail CENVAT credit at the time of procuring the capital goods, as required by Rule 3(5) of the CENVAT Credit Rules, 2004. Consequently, since no credit was taken initially, there was no obligation to reverse any credit on the cleared capital goods. Given this, the Tribunal concluded that the show-cause notice was unnecessary in this scenario and set aside all proceedings initiated based on it. Consequently, the impugned order was upheld, dismissing the Revenue's appeal and disposing of the respondent's cross objection accordingly.