2015 (10) TMI 569 - AT - Central Excise

CENVAT Credit - removal of capital goods after use - removal of cylinders/rollers which are used in printing of packaging materials - Held that - The Rule 3(4) of CCR 2002 has been amended by notification No.13/03-CE (NT) dt.1.3.2003 where the provisions were inserted for removal of inputs and capital goods removed as such and stipulates where the amount equal to the credit availed on such inputs or capital goods is to be paid by the manufacturer. Rule 3 (5A) was also introduced w.e.f.16.5.2005 wherein specific provisions have been inserted that if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. There is no dispute on the fact that these rollers are capital goods used and worn out. These goods were not cleared as such as held by the department but these are used and worn out. Once the engravings are worn out, it cannot be used in printing of material unless the engravings are redone which involves detailed processing of enameling, melting etc. which amounts to manufacture. The appellants have also cleared the goods in equal proportion to dealers also. - In the present case demand of reversal of entire credit on used and worn out capital goods cleared is not sustainable as these goods are cleared as such but used and worn out Rollers. Accordingly the demand is restricted to the extent on the value arrived after allowing depreciation. The ld. Advocate also submits that appellants have already paid duty in excess as per transaction value. I hold that since the appellants have discharged duty as per the transaction value on the goods declared it as scrap, the differential duty, if any, is demandable to the extent on the value of capital goods after allowing depreciation as held by the Hon ble Madras High Court 2010 (10) TMI 424 - MADRAS HIGH COURT and Tribunals Larger Bench (2013 (12) TMI 82 - CESTAT CHENNAI). Appellants already paid excise duty as per the transaction value and if the depreciation value is taken into account and if it results in excess payment, no amount is payable by appellant and the appellants are not entitled for any refund. Adjudicating authority is directed to re-quantify the amount after allowing depreciation value only to this extent Appellants shall produce all the relevant details before the original authority - Decided in favour of assessee.

Summary

Issues involved:
- Whether used and worn out cylinders/printing rollers cleared as scrap are to be considered as capital goods cleared as such, leading to the reversal of entire credit availed on the rollers.
- Whether old and used machineries cleared on payment of duty on transaction value are to be treated as capital goods cleared as such, warranting full reversal of credit.

Analysis:

1. Issue 1 - Used and worn out cylinders/printing rollers cleared as scrap:
The appellants argued that the rollers were fully used and cleared as scrap after the engravings were worn out, paying appropriate excise duty on the transaction value. They contended that the demand was time-barred for the period between April 2001 and August 2005, as there was no provision to demand duty on removal of capital goods during that time. The appellants emphasized that they had clearly mentioned the nature of the goods in their invoices and returns, denying any suppression of facts. Additionally, they highlighted the ambiguity in the interpretation of rules regarding the removal of capital goods as such and cited relevant court decisions to support their case.

2. Issue 2 - Clearance of old and used machineries:
Regarding the old and used machineries cleared by the appellants, the department insisted on the full reversal of credit, alleging that the goods were misdeclared as scrap. The department argued that the machineries were not scrap and were returned to the appellants after being cleared, indicating that they were not intended for melting. The department also challenged the classification claimed by the appellants, asserting that the goods should be considered as re-melting scrap, which includes repairable articles.

3. Judgment and Decision:
After considering both sides, the tribunal reviewed the relevant provisions of the Cenvat Credit Rules and amendments made therein. The tribunal noted that the rollers in question were capital goods that had been used and worn out, not cleared as such. Citing precedents, the tribunal held that duty on old and used goods is payable after allowing depreciation on the value, as established in previous court decisions. The tribunal directed the re-quantification of the amount owed by the appellants, factoring in depreciation value, and clarified that no refund would be provided if the excess duty had already been paid as per the transaction value. The appeals were allowed subject to the re-quantification by the original authority, emphasizing the importance of providing all relevant details for the re-assessment.

In conclusion, the tribunal ruled in favor of the appellants, recognizing the distinction between capital goods cleared as such and used and worn out goods cleared as scrap. The decision highlighted the significance of allowing depreciation on the value of old and used capital goods, ensuring a fair assessment of the duty payable by the appellants.