2016 (12) TMI 974 - AT - Central Excise

Cenvat credit - duty liability / reversal of credit on clearance of capital goods - Period of limitation - Held that - We take notice of the Law as applicable during the period and the provision for payment of duty on transaction value on removable of capital assets had been brought on statute with effect from 16/05/05 wherein Sub Rule (5A) provided that if the capital goods are cleared as waste and scrap, manufacturer shall pay an amount equal to the duty leviable on transaction value. The provisions relating to proportionate depreciation come vide notification with effect from 13/11/2007. We also find that Hon ble Madras High Court in the case of Commissioner of Central Excise, Coimbatore Vs. Lakshmi Machine Works Ltd. 2015 (3) TMI 694 - MADRAS HIGH COURT held, where the capital assets is removed after a period of use it does not amount to removal as such. Accordingly, we hold that the removal of capital assets by the appellant in the present appeal is not removal as such and accordingly, we hold that no duty was required to be paid by way of reversal, as demanded by the revenue, being the amount in dispute - decided in favor of appellant-assessee.

Summary

Issues:
1. Liability to pay Cenvat credit reversal on cleared capital assets.
2. Invocability of extended period of limitation.

Analysis:

Issue 1: Liability to pay Cenvat credit reversal on cleared capital assets:
The manufacturing assessee appealed against the liability to pay, by way of reversal, the Cenvat credit taken at the time of acquiring capital assets subsequently cleared and duty paid on the transaction value. The revenue alleged suppression of facts by the appellant to evade duty payment, invoking the extended period of limitation under Section 11A of the Central Excise Act. The Order-in-Original upheld the demand for duty and imposed penalties. The Commissioner (Appeals) confirmed the duty demand but set aside the penalty based on a Larger Bench ruling. The appellant cited High Court judgments to argue against duty reversal, emphasizing that the removal of capital assets after a period of use does not warrant duty payment. The Tribunal considered relevant laws and court rulings, concluding that the removal of capital assets in this case did not require duty reversal. Consequently, the appellant was entitled to a refund of the deposited amounts, and the demand, interest, and penalties were set aside.

Issue 2: Invocability of extended period of limitation:
The extended period of limitation under Section 11A of the Central Excise Act was invoked based on alleged suppression of facts by the appellant. The Tribunal, after considering the facts and legal precedents, found in favor of the appellant regarding duty reversal, leading to the rejection of the extended period of limitation. The Tribunal's decision to set aside the demand, interest, and penalties also implied a rejection of the invocability of the extended period of limitation. The appellant's appeal was allowed with consequential benefits.

This detailed analysis of the judgment highlights the key legal issues, arguments presented, relevant laws, court rulings, and the Tribunal's final decision, providing a comprehensive understanding of the case.