2018 (11) TMI 666 - AT - Central Excise

Reversal of credit/discharge of duty on the capital goods - capital goods cleared as such - Held that - The Larger Bench in Navodhaya Plastic Industries Ltd. s case 2013 (12) TMI 82 - CESTAT CHENNAI has held that after use of the capital goods for many years, credit is required to be reversed by reducing its value @ 2.5% per quarter of use of the said machinery. Thus, there cannot be any doubt that the appellant is required to reverse CENVAT Credit/discharge duty on the capital goods after allowing depreciation on the value @ 2.5% per quarter of its use - matter is remanded to arrive at the quantum of credit required to be reversed by the appellant - appeal allowed by way of remand.

Summary

Issues:
- Whether the appellants are required to reverse credit/discharge duty on capital goods sold/cleared from the factory in 2007 after being installed and used between 1994 and 1997?

Analysis:
1. Background: The appellants filed appeals against an Order-in-Appeal passed by the Commissioner of Central Excise, Mumbai-I, regarding the availed CENVAT Credit on capital goods sold in 2007 after being used in the factory premises for several years.

2. Appellant's Contention: The appellant argued that the used capital goods were not cleared "as such" for the purpose of Rule 3(5) of CENVAT Credit Rules, 2004. They cited the case of Madura Coats Pvt. Ltd. and Nahar Industrial Enterprises Ltd. to support their claim that duty was not payable on the sale of used capital goods.

3. Revenue's Argument: The Revenue contended that as per the Larger Bench decision in Navodhaya Plastic Industries Ltd.'s case, CENVAT Credit needed to be reversed by reducing the value at 2.5% per quarter of use of the machinery.

4. Judgment: The Tribunal found that conflicting views existed on whether the credit should be reversed on the sale of used capital goods. Following the Navodhaya Plastic Industries Ltd.'s case and the judgment of the Hon'ble Madras High Court in Rogini Mills Ltd.'s case, it was concluded that the appellant was required to reverse the credit on the capital goods after allowing depreciation at 2.5% per quarter of its use.

5. Decision: The matter was remanded to the adjudicating authority to determine the quantum of credit to be reversed by the appellant after considering the depreciation at 2.5% per quarter. The appeals were allowed by way of remand for further proceedings.

6. Conclusion: The judgment clarified the requirement for the appellant to reverse CENVAT Credit on capital goods sold in 2007 after being used in the factory premises, based on the principles of depreciation as per the Navodhaya Plastic Industries Ltd.'s case.