2016 (12) TMI 154 - AT - Central Excise

Demand - duty liability at the time of clearance of capital goods on which credit has been availed by appellant - The admitted facts are that the appellants cleared old and used capital goods (DG sets and parts thereof etc.) on payment of duty @ 10% to their sister unit at Panipat. The Department contended that they have to pay duty @ 16% Ad- valorem as prevailing at the time of clearance of such capital goods. The impugned order held that the capital goods were cleared after prolonged use and by applying Rule 3 (5A) of Cenvat Credit Rules, 2004 the duty liability @ 16% prevailing at the time of removal should be discharged - Held that - a plain reading the provisions of Rule 3 (5) reveals that when capital goods on which Cenvat credit has been taken are removed as such from the factory, the manufacturer shall pay an amount equal to credit availed in respect of such capital goods. In the present case, there is nothing on record to show that capital goods were cleared as waste and scrap. Accordingly, we find no reason to refer to the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004. In fact it is clear that Rule 3 (5) was amended w.e.f. 13/11/07 providing for reversal of credit based on depreciated value. Further, during the period relevant to the present case i.e. February and March 2007, the pre-amended provision will apply. In fact we also note that there are many decided case laws to support the contention of the appellant that even the provisions of Rule 3 (5) were not applicable to the appellants as the goods have been cleared after prolonged use and cannot be considered as clearance as such. However, in the present case, the appellants reversed whatever credit availed by them on such capital goods. In these circumstances, we find no justification to demand any extra amount from the appellant. Appeal allowed - decided in favor of appellant-assessee.

Summary

Issues:
- Duty liability on clearance of capital goods with availed Cenvat credit
- Applicability of Rule 3 (5) of Cenvat Credit Rules, 2004
- Interpretation of Rule 3 (5A) of Cenvat Credit Rules, 2004
- Pre-amended provisions vs. amended provisions
- Justification for demanding extra amount from the appellant

Analysis:

The appeal in this case pertains to the duty liability of the appellant at the time of clearance of capital goods on which they had availed Cenvat credit. The Revenue demanded a differential amount of duty from the appellant upon clearing the capital goods after many years of use. The main contention was whether the duty liability should be calculated at the rate applicable at the time of clearance or based on the Cenvat credit initially availed. The Tribunal examined the provisions of Rule 3 (5) of the Cenvat Credit Rules, 2004, which state that when capital goods are removed as such from the factory, the manufacturer must pay an amount equal to the credit availed. However, the Tribunal found that in this case, the capital goods were not cleared as waste or scrap, and therefore, Rule 3 (5A) was not applicable.

The Tribunal noted that Rule 3 (5) was amended to provide for the reversal of credit based on the depreciated value of the capital goods. Since the goods in question were cleared during a period when the pre-amended provision was in force, the Tribunal held that the appellant had already reversed the credit availed on the capital goods, and there was no justification for demanding any extra amount. The Tribunal also referred to previous case laws supporting the appellant's contention that the provisions of Rule 3 (5) were not applicable in this scenario, as the goods were cleared after prolonged use and could not be considered as clearance as such.

In conclusion, the Tribunal found the impugned order to be without merit and set it aside, allowing the appeal in favor of the appellant. The decision was based on a clear interpretation of the legal provisions and established case laws, emphasizing that Rule 3 (5) should not be used as a charging section to collect additional revenue from the manufacturer.