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2014 (8) TMI 332 - AT - Central ExciseCENVAT Credit - transfer of ownership / sale to another without removal of capital goods goods - contravention of Rules 3(5B),2(a)(A) and 3(5) of the Central Credit Rules, 2004 - another unit / purchaser is situated within the same premises - Held that - once the ownership and control of the equipments, machineries are transferred to another legal entity, even if it is situated in the same factory premises, it would be construed as removal within the meaning of Rule 3(4) of the CENVAT Credit Rules,2004 and CENVAT Credit on the capital goods availed by the transferor is liable to be recovered. - Decision in the case of Associated Cement s 2007 (12) TMI 210 - KARNATAKA HIGH COURT followed. However, it is difficult to hold at this stage, without ascertaining the disputed facts that after sale of the capital equipments, machinery etc. by the Appellant to M/s. JKETL, the control has also been divested in favour of M/s. JKETL on the face of a stiff argument in this regard by the Ld. Adv. for the Appellant. It is not is dispute that the Appellant have all along been claiming that they are the de facto manufacturer of the Lime from the Lime sludge. We observe that there is no detailed finding recorded on this aspect by the Ld. Commissioner. Also, there is a dispute about transfer/use of the land in favour of the Appellant - matter remanded back for ascertaining the facts and to apply the ratio of Associated Cement s case - however penalty set aside - Decided partly in favour of assessee.
Issues Involved:
1. Wrongful availment and utilization of CENVAT Credit. 2. Alleged contravention of Rules 3(5B), 2(a)(A), and 3(5) of the Central Credit Rules, 2004. 3. Ownership and control over capital goods post-sale. 4. Applicability of penalties under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944. Detailed Analysis: 1. Wrongful Availment and Utilization of CENVAT Credit: The Appellant, engaged in the manufacture of excisable goods, availed CENVAT Credit on pollution control equipment during August 2007 to March 2008 amounting to Rs. 2,37,20,987/-. These capital goods were later sold to M/s JKETL. A show cause-cum-demand notice alleged that the Appellant wrongly availed and utilized the credit, with Rs. 1,89,04,377/- availed after the sale and Rs. 48,16,610/- availed before sale but not reversed after the sale. The Commissioner confirmed the demand and imposed equivalent penalties. 2. Alleged Contravention of Rules 3(5B), 2(a)(A), and 3(5) of the Central Credit Rules, 2004: The Appellant argued that the demand notice was issued under Rule 3(5B) but the order confirmed the demand under Rule 3(5). The Tribunal found that the show cause notice alleged contraventions of multiple rules and the adjudicating authority did not go beyond the notice's scope. The Tribunal upheld that the adjudicating authority's confirmation of the demand under Rule 3(5) was valid as it considered the cumulative facts. 3. Ownership and Control Over Capital Goods Post-Sale: The Appellant contended that ownership is irrelevant for availing CENVAT Credit and cited various judgments to support this. However, the Tribunal distinguished these cases, noting that in those instances, the supplier had reversed the credit upon removal, which was not the case here. The Tribunal emphasized that the capital goods were sold without reversing the credit, making the Appellant's reliance on those judgments inapplicable. The Tribunal also addressed the issue of 'removal' of capital goods. The Appellant argued that since the goods were not physically removed from the factory premises, the credit should not be reversed. The Tribunal referred to the Supreme Court's interpretation of 'removal' in J.K. Spinning and Weaving Mills and concluded that the context of 'removal' in the present case did not align with the Appellant's interpretation. The Tribunal applied the principle from the Karnataka High Court's judgment in Associated Cements, which held that even without physical removal, the transfer of ownership and control constituted 'removal.' 4. Applicability of Penalties: The Appellant argued against the imposition of penalties, citing full disclosure to the department and the absence of suppression or mis-declaration. The Tribunal agreed, noting that the issue involved was an interpretation of law and not suppression of facts. Therefore, the penalty under Rule 15 of the CENVAT Credit Rules, 2004 read with Section 11AC of the Central Excise Act, 1944, was deemed unwarranted. Conclusion and Remand: The Tribunal concluded that the transfer of ownership and control of capital goods to M/s JKETL constituted 'removal' under Rule 3(5) of the CENVAT Credit Rules, 2004, making the credit availed by the Appellant recoverable. However, due to disputed facts regarding the control and use of the lime kiln plant post-sale, the case was remanded to the adjudicating authority for further examination. The penalty imposed was set aside.
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