2018 (3) TMI 446 - AT - Central Excise

CENVAT credit - Duty on depreciated value of capital goods removed - the department was of the view that the capital goods have been removed as such and that the assessee is liable to reverse the credit - Board Circular No.43/34/2002-CX dated 1.7.2002 as well as Circular No.495/16/1993 dated 26.5.1993 - Held that - As per the Board s Circular, during the relevant period, the assessees are liable to pay duty on the basis of the depreciated value of the capital goods removed on the credit availed capital goods - the Commissioner (Appeals) has given a very reasoned order by setting aside the confirmation of demand and directed the lower authority to requantify the duty on the basis of the depreciated value of the capital goods - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Liability to reverse credit on sale of capital goods.
2. Applicability of Rule 3(5) during the relevant period.
3. Interpretation of Board Circulars regarding payment on removal of capital goods.
4. Consideration of depreciated value of capital goods for duty liability.

Analysis:

1. The case involved the issue of whether the assessee was liable to reverse credit on the sale of capital goods. The department contended that the capital goods were removed as such, requiring the assessee to reverse the credit. The original authority confirmed a demand, which the Commissioner (Appeals) partly set aside. The Commissioner directed the assessee to pay duty on the depreciated value of the capital goods removed, along with interest for any delay.

2. The assessee argued that during the relevant period, Rule 3(5) was not applicable, and therefore they were not liable to reverse the credit. The assessee relied on Board Circulars from 2002 and 1993, which stated that manufacturers should pay an amount equal to the CENVAT credit taken on capital goods reduced by 2.5% for each quarter of a year from the date of taking the credit. The assessee contended that since the capital goods were sold after more than ten years of use, they should not be liable to pay any amount.

3. The department, represented by the AR, argued that the assessee had removed the capital goods as such and should not have been directed to quantify the demand based on the depreciated value of the goods. However, the Tribunal upheld the decision of the Commissioner (Appeals), stating that the assessee was liable to pay duty on the depreciated value of the capital goods removed. The Tribunal found that the Commissioner had given a reasoned order, directing the lower authority to re-quantify the duty based on depreciation, in accordance with the Board's Circular.

4. Ultimately, the Tribunal dismissed the appeals filed by both the assessee and the department, upholding the decision of the Commissioner (Appeals) regarding the liability to pay duty on the depreciated value of the capital goods removed. The Tribunal found no grounds to interfere with the Commissioner's order, thereby sustaining the decision.