2016 (9) TMI 889 - AT - Central Excise

Cenvat credit - Whether, after putting the capital goods into use for a period of around 10 years, the assessee is required to reverse the cenvat credit originally taken at the time of receipt of goods or the fact of payment of duty on the transaction value would satisfy the provisions of law - Held that - Rule 3(5) of Cenvat Credit Rules, 2004, provides for reversal of cenvat credit when the capital goods are removed as such. The expression as such appearing in the said Rule was the subject matter of various decisions and stand interpreted by various Courts to the effect that the said provisions would apply when the capital goods are cleared without putting them to use. The issue stands decided by a Larger Bench decision in the case of Modernova Plastyles Pvt. Ltd. vs. Commissioner 2008 (10) TMI 51 - CESTAT, MUMBAI . In view of the same, the impugned orders are set aside. - Decided in favour of appellant

Summary

Issues:
1. Reversal of cenvat credit on sale of used capital goods after a period of use.

Analysis:
The case involved a dispute regarding the reversal of cenvat credit on the sale of used capital goods after a period of use. The appellants, engaged in manufacturing textile articles, purchased capital goods in 1996-97 and sold them in 2006-2008 after around 10 years of use. The Revenue contended that the appellants were required to reverse the entire cenvat credit originally availed upon clearing the used capital goods. The issue to be decided was whether the payment of duty on the transaction value upon clearance of the capital goods would suffice or if the cenvat credit needed to be reversed as per Rule 3(5) of the Cenvat Credit Rules, 2004.

The Tribunal referred to various decisions interpreting the expression "as such" in Rule 3(5) of the Cenvat Credit Rules, indicating that the provision applies when capital goods are cleared without being used. The Tribunal upheld its decision in the case of Cummins India Ltd. vs. Commissioner, which was confirmed by the Bombay High Court and also cited decisions from the Madras High Court supporting the same interpretation. The Commissioner (Appeals) referred to a Larger Bench decision in the case of Modernova Plastyles Pvt. Ltd. vs. Commissioner, which was also considered in subsequent cases.

In a related case, the Tribunal held that upon clearance of used capital goods, the assessee was required to pay an amount equal to the duty leviable on the transaction value instead of reversing the entire modvat credit originally availed. The Tribunal discussed various case laws on the subject, including the decision in the case of Green Ply Industries Ltd. vs. CCE Jaipur and emphasized the binding nature of decisions confirmed by higher courts. The Larger Bench decision was also presented in other cases before different courts, leading to the conclusion that the Revenue's stance had no merit. Consequently, the impugned orders were set aside, and the appeal was allowed with consequential relief.