2015 (10) TMI 1220 - AT - Central Excise

Refund claim - CENVAT Credit - ower authorities rejected the refund claim relying upon Rule 3(5) of Cenvat Credit Rules 2004 holding that removal of forklift is as such requires reversal of Cenvat Credit availed. - Held that - There is no dispute that forklift was removed after use in the factory premises of appellant. Revenue s case of requirement of reversal entire amount of Cenvat Credit availed is an incorrect view. - In view of the foregoing and authoritative judicial pronouncement 2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT on the same issue the impugned order is liable to be set aside

Summary

Issues:
Refund claim on Cenvat Credit for forklift sold after use.

Analysis:
The appeal was filed against the Order-in-Appeal NO. AGS(32)11/2010 dated 15.02.2010. The issue revolved around a refund claim on Cenvat Credit for a forklift that was sold after being used in the factory premises. The appellant had purchased the forklift and availed Cenvat Credit, later selling it on discharging central excise duty. The department contended that the appellant should have paid an amount equal to the credit taken, leading to the reversal of differential excise duty and interest under protest. The lower authorities rejected the refund claim citing Rule 3(5) of Cenvat Credit Rules, 2004, which mandates reversal of Cenvat Credit on removal of capital goods. However, the Member (J) found that the forklift was removed after use, and the Revenue's argument for complete reversal of Cenvat Credit was incorrect.

The Member (J) referred to the judgment of the Hon'ble High Court of Punjab & Haryana in the case of Raghav Alloys Ltd. The court highlighted the distinction between inputs and capital goods, emphasizing that capital goods lose their identity only when they become in-serviceable after a period of use. The purpose of Cenvat Credit on capital goods is to prevent duty cascading, and requiring reversal of credit even after years of use would defeat this purpose. The addition of a proviso to Rule 3(5) clarified that if capital goods are removed after use, the manufacturer must pay the Cenvat Credit amount reduced by a specified percentage for each quarter of use. The judgment established that there is a difference between goods cleared without use and cleared after utilization, supporting the appellant's position.

Based on the authoritative judicial pronouncement and precedents cited, the Member (J) set aside the impugned order and allowed the appeal with consequential relief. The judgment reaffirmed that the issue of refund claim on Cenvat Credit for capital goods sold after use is settled in favor of the appellant, aligning with the legal principles established by the Hon'ble High Court and previous tribunal decisions.