2017 (8) TMI 831 - AT - Central Excise

CENVAT credit - clearance of capital goods after use - the capital goods was imported on 27.09.2006 and was used for about eight months and then cleared on 10.05.2007 - Rule 3(5) of CCR 2004 - whether the appellant is liable to reverse the cenvat credit on capital goods when the capital goods are removed after being used for about eight months? - Held that - prior to 13.11.2007 no duty was payable in respect of capital goods which was used before it is removed. In the present case also, the capital goods was imported on 27.09.2006 and was used for about eight months and then cleared on 10.05.2007 without payment of duty under the belief that there was no provision in the Cenvat Credit Rules 2004 to pay cenvat either in full or depreciated amount of cenvat during the relevant period. The Hon ble High Court of Karnataka in the case of CCE, Bangalore - II Vs. Solectron Centum Electronics Ltd 2014 (10) TMI 596 - KARNATAKA HIGH COURT , after considering the provisions of cenvat credit before its amendment and after the amendment on 13.11.2007 has held that till the amendment of Rule 3(4) of Cenvat Credit Rules 2004 as on 13.11.2007, in respect of used capital goods, there was no liability to pay duty and it was only with the addition of the proviso thereto that the situation changed. Assessee not required to reverse CENVAT credit - appeal allowed - decide4d in favor of appellant.

Summary

Issues:
Appeal against order demanding reversal of availed cenvat credit on clearance of used capital goods and demand of duty on transaction value.

Analysis:
The appellant availed cenvat credit on capital goods and cleared them without payment of duty, leading to a demand for reversal of credit. The Commissioner modified the order, demanding duty on transaction value. The appellant argued that the order was contrary to statutory provisions and binding judicial precedents. They highlighted the amendment to Rule 3(5) of the Cenvat Credit Rules in 2007, which they claimed was not applicable to their case. They cited several decisions supporting their position. The AR supported the findings of the impugned order.

Upon review, the Tribunal focused on whether the appellant was liable to reverse the cenvat credit on capital goods cleared after use. The Tribunal noted that prior to the 2007 amendment, no duty was payable on used capital goods. They referenced the amended proviso, which clarified the payment requirement for used capital goods. The Tribunal cited various High Court judgments interpreting the term "as such" in the Cenvat Credit Rules. They highlighted decisions that emphasized goods not being cleared in the same position after use were not subject to reversal of credit.

The Tribunal specifically referenced judgments from the Punjab and Haryana High Court, Bombay High Court, Delhi High Court, and the High Court of Karnataka. They noted that until the 2007 amendment, there was no duty liability on used capital goods. Despite conflicting views in other judgments, the Tribunal, sitting in Bangalore, followed the Karnataka High Court's ruling that no duty was payable on removal of used capital goods before the 2007 amendment. Consequently, the impugned order was deemed unsustainable, and the appeal was allowed in favor of the appellant.