2015 (1) TMI 1135 - AT - Central Excise

Reversal of Cenvat Credit Removal as such of capital goods after use - demand of reversal of entire credit with Interest - Held that - The capital goods loose their identity as capital goods only when after use over a period of time, the same has become in-serviceable and fit to be scrapped. The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, it has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared as such. - The machine cleared after putting into use for nine years cannot be treated as Cleared as such . Insertion of proviso w.e.f. 13.11.2007 makes it clear that there is difference between machines cleared without putting into use and cleared after use Following decision of Commissioner Central Excise Commissionerate Versus M/s Raghav Alloys Ltd. 2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT - decided in favor of assessee.

Summary

Issues:
- Short levy of duty and interest under CENVAT Credit Rules, 2004
- Applicability of Rule 3(5) of CENVAT Credit Rules
- Prospective nature of Rule amendment
- Time-barred show-cause notice

Short levy of duty and interest under CENVAT Credit Rules, 2004:
The case involved M/s Pushpak Steel Industries Pvt. Ltd., who purchased an Electric Motor and availed CENVAT credit. The appellants cleared the motor after use without reversing the credit amount, resulting in a short levy. The Department issued a show-cause notice for the short levy, interest, and penalty under relevant provisions. The Order-in-Original confirmed the demand, which was challenged in appeal.

Applicability of Rule 3(5) of CENVAT Credit Rules:
The appellant argued that the amendment to Rule 3(5) of CENVAT Credit Rules in 2007, which introduced a provision for reducing CENVAT credit on capital goods removed after use, should apply in their case. They contended that the capital goods were not removed "as such" but after use, justifying a reduction in CENVAT credit.

Prospective nature of Rule amendment:
The Commissioner (Appeals) upheld the Order-in-Original, stating that the amendment to Rule 3(5) was prospective. However, the appellant cited rulings from the Punjab & Haryana High Court and the Bombay High Court to support their argument that duty paid on transaction value at the time of removal before the amendment was correct.

Time-barred show-cause notice:
The appellant also argued that the show-cause notice was time-barred as the transaction occurred in November 2005 and was duly disclosed. The Tribunal considered the arguments and rulings cited by the appellant, including the decision of the Punjab & Haryana High Court, and ruled in favor of the appellant. The Tribunal held the show-cause notice to be time-barred and allowed the appeal in favor of the appellant, granting consequential benefits.

This judgment highlights the importance of understanding the applicability of amendments to rules, the prospective nature of rule changes, and the significance of timely issuance of show-cause notices in excise duty cases.