2016 (7) TMI 1199 - AT - Central Excise

Cenvat Credit - capital goods - after using them for about 3-6 years, cleared them to their sister unit in Bangalore reversing Cenvat credit as applicable on the depreciated value of the capital goods - The Commissioner (Primary Adjudicating Authority) held that the entire amount of Cenvat credit taken at the time of acquisition of these capital goods was required to be paid (reversed) at the time of clearance of these goods as capital goods were removed as such i.e. as capital goods and not as scrap. Held that - matter remanded back to the original adjudicating authority for arriving at the depreciated value of the capital goods in question inasmuch as I nowhere find as to how the depreciated value stands arrived at by the appellant. Levy of penalty - It is evident that on the issue involved in this case, Delhi High Court and Chennai High Court had taken different views. As per Delhi High Court, no cenvat credit was required to be reversed when capital goods were cleared after use. In these circumstances, it will be unjust and injudicious to subject the appellant to penalty, particularly when the appellant cleared the capital goods and paid duty at the depreciated value. Further, as the goods were cleared to its sister unit and duty paid would have been available to sister unit as credit, there could not have been any malafide on the part of the appellant. Indeed, in the appellants own case, CESTAT vide its order No.51934/2014 dated 15.04.2014 referred to earlier waived penalty altogether. Accordingly, no penalty is warranted in this case. Decided partly in favor of assessee.

Summary

Issues:
Reversal of Cenvat credit on capital goods removed after use.

Analysis:
The appeal was filed against an order confirming duty demand and imposing penalties for not reversing Cenvat credit on capital goods removed after use. The appellant acquired capital goods, took Cenvat credit, and later cleared them to a sister unit in Bangalore after 3-6 years, reversing the credit based on depreciated value. The Commissioner held that the entire Cenvat credit taken at acquisition had to be reversed as the goods were removed as capital goods, not as scrap.

The appellant argued that goods removed after use should not be considered as removed "as such," citing a Delhi High Court case. However, a Tribunal case departed from this judgment, following a Madras High Court decision and a CBEC Circular requiring credit deduction for each quarter of use. The appellant's previous case and location in Rajasthan were also considered.

Considering both sides' contentions, the Tribunal noted its previous decision requiring deduction based on machine use quarters. The jurisdictional impact of Delhi High Court's judgment was discussed, but the Tribunal found the Larger Bench's decision applicable due to location and legal considerations. The Tribunal emphasized the need for consistency in applying the CBEC Circular.

The Tribunal highlighted conflicting views of Delhi and Chennai High Courts on Cenvat credit reversal for used capital goods. It deemed penalty unjust given the appellant's duty payment at depreciated value and transfer to a sister unit. The absence of malafide intent and previous penalty waiver in a similar case were noted, leading to the decision to set aside the penalty.

In conclusion, the Tribunal set aside the original order, remanding the matter for determining the Cenvat credit to be reversed based on the CBEC Circular's principles, with applicable interest if not already paid. The decision aimed to ensure fair treatment and adherence to legal guidelines in the appellant's case.