2017 (7) TMI 334 - AT - Central Excise

Reversal of CENVAT credit - the appellant reversed the cenvat credit on capital goods on depreciated value as per Rule 3(5A) of the CCR, 2004 - Revenue is of the view that the appellant is entitled to avail cenvat credit upto 50 % of the value of capital goods, therefore, for the intervening period the appellant is required to reverse more cenvat credit at the time of clearance of the capital goods - Held that - The appellant has rightly reversed the cenvat credit on appropriate value of the capital goods. - The interpretation made by the Revenue is only on assumption and presumption which is not sustainable in the eyes of law. - demand set aside - decided in favor of appellant.

Summary

Issues:
Demand of duty on account of reversal of cenvat credit by the appellant.

Analysis:
The appellant appealed against the demand of duty due to the reversal of cenvat credit by them. The case revolved around the appellant procuring capital goods and clearing them as capital goods after use, subsequently reversing the cenvat credit on depreciated value as per Rule 3(5A) of the Cenvat Credit Rules, 2004. The Revenue contended that the appellant should have availed 50% cenvat credit in the first year and 50% in the second year, resulting in the appellant being required to reverse more cenvat credit at the time of capital goods clearance. The impugned order demanded recovery of cenvat credit due to the alleged insufficient reversal by the appellant, along with interest and penalty.

Upon hearing both sides and examining the records, the Tribunal focused on Rule 3(5A) of the Cenvat Credit Rules, 2004. The Rule stipulates that if capital goods are cleared after use, cenvat credit must be reversed on the depreciated value at a rate of 2.5% per quarter from the date of taking the credit. The Tribunal highlighted that the Rule does not specify a 50% depreciation in the first year or full value depreciation in the second year, as assumed by the Revenue. The Tribunal emphasized that the appellant was entitled to avail depreciation on the capital goods from the date of procurement itself, rejecting the Revenue's interpretation based on assumption and presumption.

The Tribunal concluded that since the appellant correctly availed depreciation under Rule 3(5) of the Cenvat Credit Rules, 2004, on the entire value of the capital goods from the initial credit-taking date, the appellant's reversal of cenvat credit was appropriate. The Tribunal deemed the demand against the appellant to be unfounded, based solely on assumption and presumption, and not legally sustainable. Consequently, the demand imposed on the appellant was set aside, and the appeal was allowed with consequential relief. The judgment was dictated and pronounced in open court by the Tribunal.