2017 (6) TMI 36 - AT - Central Excise

CENVAT credit - capital goods being sent to their own unit are those which have been used by the assessee for several years - Held that - the issue is squarely covered in favor of the appellant by the judgement of the Karnataka High Court in the case of Solectron Centrum Ltd. 2014 (10) TMI 596 - KARNATAKA HIGH COURT , where it was held that Capital goods purchased for DTA unit was used, it was not removed as such and when it was removed to EHTP unit again, they have no liability to pay the credit - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Dismissal of appeal by Commissioner (Appeals) and upholding of order-in-original.
2. Availing CENVAT credit on stock transferred to own unit.
3. Demand of differential duty, interest, and penalty.
4. Interpretation of term "removed as such" for capital goods.
5. Applicability of judicial precedents on the issue.
6. Reversal of credit on used capital goods.
7. Liability to pay duty on used capital goods.

Analysis:
1. The appeal was against the order dismissing the appeal by the Commissioner (Appeals) and upholding the order-in-original. The appellant, engaged in manufacturing pet bottles, availed CENVAT credit on inputs and capital goods. The department noted stock transfer to their own unit, leading to a demand for differential duty, interest, and penalty under relevant sections of the Central Excise Act 1944. The adjudicating authority confirmed the demand, which was upheld by the Commissioner.

2. The appellant contended that the impugned order ignored binding judicial precedents. They argued that duty equal to CENVAT credit availed is required only when capital goods are removed "as such." In this case, the capital goods sent to their unit had been used for several years. The appellant cited various decisions supporting their stance.

3. The appellant highlighted that there was no provision to reverse credit on used capital goods during the relevant period. Even though the provision for reversal was introduced later, the appellant voluntarily reversed the amount. The appellant also emphasized the interpretation of the term "removed as such" by the Karnataka High Court and distinguished it from the Revenue's reliance on a different case.

4. After hearing both parties and examining the cited judgments, the Member found the issue favoring the appellant based on the Karnataka High Court's decision in the Solectron Centrum Ltd case and other relevant judgments. The Member allowed the appeal, following the ratio of the cited judgments.

5. The judgment was pronounced in open court on the specified date, with the Member allowing the appeal in favor of the appellant. The detailed analysis considered the interpretation of the term "removed as such" for capital goods and the applicability of judicial precedents to the case, ultimately leading to a decision in favor of the appellant based on established legal principles and previous rulings.