2014 (9) TMI 69 - AT - Central Excise

Reversal of CENVAT Credit - whether the amount equivalent to the credit originally taken has to be reversed or not for the clearance of the capital goods after usages for a considerable period - Held that - Madras High Court in the case of CCE Vs. Rogini Mills Ltd. 2010 (10) TMI 424 - MADRAS HIGH COURT accepted the decision of the Tribunal, reversal of CENVAT credit of 2.5% for each quarter of an year, from the date of taking of CENVAT credit. The Larger Bench of the Tribunal in the case of Navodhaya Plastic Industries Ltd. (2013 (12) TMI 82 - CESTAT CHENNAI ), following the decision of the Hon ble Madras High Court answered the reference accordingly - issue should be examined in the light of the decision of the Larger Bench in the case of Navodhaya Plastic Industries Ltd. (supra). Accordingly, I set aside the impugned orders and remit the matter to the adjudicating authority to decide afresh after considering the decision of the Larger Bench in the case of Navodhaya Plastic Industries Ltd. (supra) - decided in favour of assessee.

Summary

Issues involved:
Whether the amount equivalent to the credit originally taken has to be reversed for clearance of capital goods after usage for a considerable period.

Analysis:

Issue 1: Reversal of credit for clearance of capital goods
The case involved a dispute regarding the reversal of the amount equivalent to the credit originally taken by the assessee on capital goods cleared after usage. The assessee, engaged in the manufacture of cotton yarn, had availed MODVAT/CENVAT credit on inputs and capital goods. The adjudicating authority demanded an amount for the clearance of capital goods during a specific period, along with interest and penalty. The Commissioner (Appeals) allowed the appeal subject to payment of duty on the depreciated value and set aside the penalty.

Issue 2: Appellate proceedings
The Revenue filed an appeal against the Commissioner's order to restore the adjudication order, while the assessee filed an appeal to set aside the impugned order. The Revenue argued that the law during the relevant period did not provide for extending depreciation on the clearance of used capital goods. The assessee contended that they were optionally exempted from duty payment under a specific notification and had unutilized credit that could be adjusted against the demand.

Judgment and Decision:
The Tribunal considered previous decisions, including one by the Hon'ble Madras High Court and a Larger Bench decision, regarding the reversal of CENVAT credit. Referring to the decision in the case of Navodhaya Plastic Industries Ltd., the Tribunal set aside the impugned orders and remitted the matter to the adjudicating authority for fresh consideration in light of the Larger Bench decision. The Tribunal allowed both appeals by way of remand, directing the adjudicating authority to reconsider the issue, including the utilization of unutilized credit, based on the precedent set by the Larger Bench decision.

In conclusion, the Tribunal's judgment emphasized the need to re-examine the issue in line with the precedent, setting aside the previous orders and allowing both appeals for further consideration by the adjudicating authority.