2018 (12) TMI 1528 - AT - Central Excise

CENVAT Credit - removal of capital goods after use - demand of reversal of cenvat credit availed at the time of receipt of the capital goods - Rule 3(5) of Cenvat Credit Rules, 2004 - Held that - From the plain reading of Rule 3(5), it is clear that duty on removal of capital goods required to be paid only in two cases i.e. if the capital goods is cleared as such without putting to use and capital goods is cleared as waste and scrap - There is no provision under Rule 3(5) or in any other Rule to demand duty if capital goods are cleared after use, therefore by invoking Rule 3(5) duty demand on the removal of capital goods as such cannot be made. Appellant is not required to pay duty on removal of capital goods as such - Appeal allowed - decided in favor of appellant.

Summary

Issues:
Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004 regarding payment of duty on removal of capital goods after use.

Analysis:
The case involved a dispute regarding the payment of duty on the removal of used capital goods as per Rule 3(5) of Cenvat Credit Rules, 2004. The appellant had availed cenvat credit on capital goods after using them for over a year and two months, following which the goods were removed to their own unit. The department contended that as per Rule 3(5), duty equivalent to the credit availed should have been paid at the time of receipt of the capital goods. The Ld. Commissioner(Appeals) upheld this demand, leading to the appeal.

The appellant argued that Rule 3(5) only requires duty payment if capital goods are removed as such or as waste and scrap, which was not the case here. The appellant relied on various judgments to support their stance, emphasizing that duty is not required to be paid on the removal of capital goods after use. On the other hand, the Revenue supported the findings of the impugned order and cited judgments to strengthen their position.

Upon careful consideration, the Tribunal analyzed Rule 3(5) of Cenvat Credit Rules, 2004, which specifies the scenarios necessitating duty payment on removal of capital goods. The Tribunal noted that duty payment is mandated only if the capital goods are cleared as such without being used or as waste and scrap. Notably, there is no provision under Rule 3(5) to demand duty if capital goods are removed after use. The Tribunal referenced the judgment of Solectron Centum Electronics Ltd, where it was clarified that prior to a specific amendment in 2007, no duty was payable on used capital goods upon removal.

Based on the legal provisions and precedents, the Tribunal concluded that duty on the removal of capital goods after use is not required to be paid as per Rule 3(5). The Tribunal also highlighted that the judgments cited by the Revenue were not applicable to the current case, as the issue had been settled in previous decisions. Consequently, the impugned order was set aside, and the appeal was allowed, aligning with the appellant's argument and established legal interpretations.