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2017 (9) TMI 221 - AT - Central ExciseMODVAT/CENVAT credit - sale of capital goods on which MODVAT credit availed - Rule 57AB of Central Excise Rules, 1944 - Held that - When capital goods are removed from the factory, the manufacturer has to pay appropriate duty of excise as if such capital goods have been manufactured in the said factory and such removal shall be made under the cover of an invoice prescribed under Rule 52A. The law in the relevant Explanation does not use the word sale or transfer of capital goods but instead uses the word removal as capital goods from the factory - The Hon ble Apex Court in the case of JK. COTTON SPINNING AND WEAVING MILLS LTD. AND ANOTHER Versus UNION OF INDIA AND OTHERS 1987 (10) TMI 51 - SUPREME COURT OF INDIA , held that removal contemplates physical removal of goods - appeal allowed - decided in favor of appellant.
Issues involved:
1. Allegation of contravention of Rule 57AB of Central Excise Rules, 1944 by transferring capital goods to a sister concern without payment of duty. 2. Interpretation of the term "removal" under Rule 57AB in the context of transferring capital goods. 3. Dispute regarding duty demand, interest, and penalties imposed on the appellant. 4. Applicability of legal precedents in similar cases to determine the duty liability. Detailed Analysis: 1. The issue in this case revolves around the alleged contravention of Rule 57AB of Central Excise Rules, 1944 by the appellants through the transfer of capital goods to their sister concern without payment of duty. The original authority confirmed a duty amount along with interest and penalties under section 11AC of the Act. The appellant challenged this decision before the Tribunal, arguing that no duty is payable as there was no physical removal of capital goods upon the sale to the sister concern. 2. The crux of the matter lies in interpreting the term "removal" under Rule 57AB. The appellant contended that the sale of capital goods did not constitute a removal as envisaged by the law, citing legal precedents where similar issues were considered. The appellant relied on the judgment in J.K. Spinning and Weaving Mills Ltd. case, emphasizing that removal implies physical movement of goods from one place to another. Additionally, the appellant cited the case of Commissioner of Central Excise Vs. CESTAT, where it was held that leasing out capital goods did not amount to removal under the CENVAT Credit Rules. 3. The dispute over duty demand, interest, and penalties persisted as the appellant argued that the transfer of capital goods to the sister concern did not trigger the obligation to pay duty. On the contrary, the respondent reiterated the findings of the impugned order, asserting that the sale of capital goods to another unit warranted the duty demand, interest, and penalties imposed. This disagreement formed a crucial aspect of the legal battle between the parties. 4. In determining the duty liability, the Tribunal referred to relevant legal provisions and past judgments. The Tribunal analyzed the applicability of Rule 3(5) of the CENVAT Credit Rules, 2004 in similar cases where the transfer of capital goods or ownership of a factory was involved. Citing precedents such as Bilt Industrial Packaging Company Ltd. and LG Balakrishnan & Bros. Ltd., the Tribunal concluded that the demand for duty on the transferred capital goods was unsustainable. Following the established legal principles and precedents, the Tribunal set aside the impugned order and allowed the appeal with any consequential relief. This comprehensive analysis delves into the core issues, legal interpretations, and precedents that shaped the judgment delivered by the Appellate Tribunal CESTAT CHENNAI.
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