2017 (12) TMI 84 - AT - Central Excise

CENVAT credit - capital goods - removal of capital goods to sister units - Rule 4(5) (a) of CCR - Held that - appellant is required to pay duty on the depreciated value that is by deducting 2.5% per quarter for the period from taking credit till the date of removal of capital goods - appeal is allowed by way of remand only for quantification purpose.

Summary

Issues:
Interpretation of Rule 4(5)(a) of Cenvat Credit Rules for removal of capital goods to sister concern, applicability of Rule 3(5) for payment of duty on removed capital goods, calculation of duty liability on depreciated value, consideration of judicial precedents in duty payment determination.

Analysis:
The case involved a dispute regarding the removal of capital goods by the appellants to their sister concern after availing cenvat credit. The department contended that the removal did not align with Rule 4(5)(a) of Cenvat Credit Rules, thus attracting duty liability under Rule 3(5). The department confirmed the demand and imposed a penalty, leading to the appeal.

The appellant argued that during the relevant period, duty payment was not required for capital goods removed after use. Citing the judgment in the case of Harsh International, the appellant asserted that Rule 3(5) applied only to goods removed without use. Alternatively, the appellant proposed duty liability based on the depreciated value of the capital goods, not the total duty initially credited.

On the contrary, the Revenue relied on precedents like Cummins India Ltd., Raghav Alloys Ltd., and Rogini Mills Ltd. to support duty payment on removed capital goods. Referring to the decision in Navodhaya Plastic Industries Ltd., the Revenue contended that duty payment should involve deducting 2.5% per quarter of credit for the period of machine use.

The Tribunal analyzed the conflicting decisions and upheld the approach in Navodhaya Plastic Industries Ltd. The Tribunal ruled that duty payment should be based on the depreciated value, deducting 2.5% per quarter from the credit amount. Consequently, the adjudicating authority was directed to recalculate the demand following this methodology. The appellant was granted an opportunity for a personal hearing before the revised adjudication order. The appeal was allowed for quantification purposes, setting aside the initial order.