2018 (4) TMI 152 - AT - Central Excise

CENVAT credit - quantum of reversal - capital goods removed after use - whether instead of payment of duty on the transaction value, whether the respondent is required to reverse in entirety the credit which was originally taken? Held that - similar issue was considered by the Larger Bench in the case of CCE H derabad Vs. Navodhaya plastic industries ltd. 2013 (12) TMI 82 - CESTAT CHENNAI . The Larger Bench observed that there is no justification for insisting on reversal of entire credit availed. Appeal dismissed - decided against Revenue.

Summary

Issues: Appeal against Order in-Appeal regarding reversal of CENVAT credit on used capital goods cleared to vendors.

Analysis:
1. Background: The appeal was filed by the Revenue against an Order in-Appeal regarding the reversal of CENVAT credit on used capital goods cleared to vendors by the respondents, who were engaged in manufacturing excisable goods falling under Chapter 84 and 85 of the CETA, 1985. The capital goods were procured, installed, and used in their factory, and CENVAT credit was availed at the time of procurement.

2. Contention: The Department contended that the respondents were required to reverse the CENVAT credit availed at the time of procurement of the original capital goods when clearing the used goods to vendors. Both lower authorities ordered the payment of duty on the transaction value, leading to the Revenue filing the present appeal.

3. Judicial Review: Upon hearing both parties and examining the records, the Tribunal noted that the capital goods had been used in the factory for a substantial period before being cleared. The key issue was whether the respondents were obligated to reverse the entire credit originally taken or pay duty on the transaction value upon clearance of the used goods.

4. Precedent and Decision: The Tribunal referred to a similar issue addressed by a Larger Bench in a previous case and cited various judgments by different High Courts regarding the reversal of CENVAT credit on used capital goods. The Tribunal emphasized the need to prevent abuse of the CENVAT credit scheme and decided to follow the decision of the Hon'ble Madras High Court in a specific case, emphasizing the importance of maintaining consistency in the application of CENVAT credit rules.

5. Case Law Support: The Tribunal highlighted that similar views had been expressed by the High Court of Madras and the Hon'ble High Court of P&H in related cases, supporting the decision to dismiss the appeal filed by the Revenue. The Tribunal found no reason to interfere with the decision of the learned Commissioner(Appeals) and upheld the ruling regarding the reversal of CENVAT credit on used capital goods cleared to vendors.

In conclusion, the Tribunal's decision was based on a comprehensive analysis of the relevant legal provisions, precedents, and the need to maintain consistency in the application of CENVAT credit rules to prevent potential abuse of the system. The dismissal of the Revenue's appeal reaffirmed the importance of adhering to established legal principles and judicial interpretations in matters concerning the reversal of CENVAT credit on used capital goods.