2018 (4) TMI 536 - AT - Central Excise

CENVAT credit - capital goods - the appellant had availed 100% credit on capital goods during FY 2010-11 instead of 50% cenvat credit on capital goods available during one Financial year and remaining 50% of the credit was in the subsequent years - Rule 4(2) (a) of CCR 2004 - time limitation - Held that - the provisions of Rule 3 (6) provides for removal of used capital goods on reversal of credit and availment of such reversed credit by recipient - the invoice vide which the old capital asset was shifted to the new factory clearly shows that the goods on which credit has been availed are used capital goods and they have been removed from one location to another location on payment of duty and thereafter cenvat credit was taken - appellant has also proved that he has availed the credit but the same has not been used as sufficient balance was there in their cenvat credit account and therefore there is no question of demanding interest and imposing penalty Extended period of limitation - Held that - invoking the extended period is not justified in the present case because there was no intention to evade payment of duty, Appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Availment of excess cenvat credit on capital goods.
2. Application of Rule 4(2) of Cenvat Credit Rules 2004.
3. Interpretation of Rule 3(6) in relation to used capital goods.
4. Eligibility to transfer cenvat credit under Rule 10 on shifting factory.
5. Justification for invoking extended period provisions.

Analysis:
1. The appeal challenged the Commissioner (Appeals) order upholding the recovery of excess cenvat credit availed on capital goods by the appellant during FY 2010-11. The appellant was alleged to have availed 100% credit instead of the permissible 50% in one financial year. The show-cause notice invoked extended period provisions for recovery. The Order-in-Original confirmed the recovery of excess credit, interest, and imposed penalties. The appellant contended that the impugned order was contrary to law and binding precedents.

2. The appellant argued that Rule 4(2) of Cenvat Credit Rules 2004 was erroneously applied, and the excess credit availed was actually used capital goods moved from one factory to another due to factory shifting. The appellant cited Rule 3(6) regarding the removal of used capital goods and the availment of reversed credit by the recipient. The appellant highlighted the lack of restrictions on availing such credit in installments under Rule 3(6) and the applicability of Rule 10 on transfer of credit upon factory relocation.

3. The appellant emphasized that the transfer of capital goods to the new factory allowed for the transfer of cenvat credit under Rule 10 without prior permission, supported by relevant case law. The appellant demonstrated through invoices that the credit was taken for used capital goods moved between locations. The appellant also argued that since the credit was not utilized, no interest should be payable, citing relevant case law on the issue of intention to evade payment of duty.

4. The AR reiterated the findings of the impugned order, but the Tribunal, after considering submissions, found Rule 3(6) applicable instead of Rule 4(2). The Tribunal noted that the appellant had availed credit for used capital goods moved between locations, as evidenced by invoices. The Tribunal agreed with the appellant's interpretation of Rule 10 and found no justification for invoking the extended period due to the absence of intent to evade duty payment.

5. Ultimately, the Tribunal set aside the impugned order, allowing the appeal and providing consequential relief. The decision was based on the interpretation of relevant rules, case law, and the lack of intention to evade duty payment, leading to the conclusion that the recovery of excess credit was not justified.