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2017 (12) TMI 316 - AT - Central ExciseCENVAT credit - capital goods installed in the factory - formation of joint venture by the appellant with 51% share - case of the department is that new joint venture was created and foam division was transferred to such joint venture, it is removal of capital goods from the appellant to joint venture. Therefore such capital goods and input lying in the joint venture premises is liable for payment of duty in accordance with Rule 3(5) CCR, 2004 - Held that - there is no dispute that the capital goods and input on which credit was availed by the appellant and subsequently the creation of joint venture it was used by the joint venture but such goods were not removed from existing premises. The payment of duty is required to be made under Rule 3(5) only in such case whether the goods are removed from the factory. In the present case admittedly the goods were lying in the same premises and was not removed, provision of Rule 3(5) shall not apply. Identical issue decided in the case of M/s. L.G. BALAKRISHNAN AND BROS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, TRICHY 2016 (6) TMI 829 - CESTAT CHENNAI , where it was held that when there is no removal of goods under cover of invoice, as provided under rule 9, there is nothing in Rule 3 (5) to invoke the deeming fiction as insisted by the department. Appeal allowed - decided in favor of appellant.
Issues Involved:
1. Applicability of Rule 3(5) of Cenvat Credit Rules, 2004 on the transfer of capital goods and inputs to a joint venture. 2. Requirement of physical removal of goods for the application of Rule 3(5). 3. Validity of demand and recovery of duty on capital goods and inputs. 4. Imposition of penalty under Section 11AC. Detailed Analysis: 1. Applicability of Rule 3(5) of Cenvat Credit Rules, 2004: The primary issue revolves around whether the creation of a joint venture and the transfer of the foam division to this new entity constitutes a "removal" of capital goods and inputs under Rule 3(5) of the Cenvat Credit Rules, 2004. The department argued that the transfer of ownership to the new joint venture necessitates the payment of duty as per Rule 3(5). However, the appellant contended that since the goods remained within the same premises and continued to be used for manufacturing dutiable goods, Rule 3(5) should not apply. 2. Requirement of Physical Removal of Goods: The judgment emphasized that Rule 3(5) is applicable only when there is a physical removal of goods from the factory premises. The Tribunal referenced previous cases, such as CCE Vs. M/s. Hindustan Lever Ltd and L.G. Balakrishnan & Bros., Ltd Vs. CCE, which clarified that the term "removal" implies a physical movement of goods from one place to another. The Tribunal reiterated that since the capital goods and inputs were not physically moved out of the factory premises, Rule 3(5) could not be invoked. 3. Validity of Demand and Recovery of Duty: The Tribunal found that the capital goods and inputs were merely transferred in ownership to the new joint venture but remained within the same premises. The judgment referenced the case of L.G. Balakrishnan & Bros., Ltd, where it was held that the duty liability arises only upon the physical removal of goods. The Tribunal concluded that the demand for duty amounting to ?25,42,117/- was not sustainable, as there was no physical removal of the goods. 4. Imposition of Penalty under Section 11AC: Regarding the imposition of penalties, the Tribunal noted that the creation of the joint venture and the transfer of the foam division were done with due intimation and approval from the department. Regular returns were filed, and there was no suppression or misstatement of facts. Consequently, the Tribunal found no justification for imposing penalties under Section 11AC. Conclusion: The Tribunal concluded that the provisions of Rule 3(5) were not applicable in this case due to the absence of physical removal of goods from the factory premises. The demand for duty and the imposition of penalties were set aside, and the appeal was allowed. The judgment emphasized that the issue at hand was no longer res integra, as it had been settled by previous rulings with identical facts.
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