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2023 (5) TMI 599 - AT - Central ExciseCENVAT Credit - removal of capital goods as such or not - change in ownership / sale of capital goods without removal of such goods from the factory premises - Revenue treated the same as removal of capital goods as the ownership of capital goods is changed and accordingly held that, the appellant is liable to pay duty under Rule 3(5A) of Cenvat Credit Rules, 2004 - extended period of limitation - levy of personal penalty - HELD THAT - There is no dispute in the fact that even though the Lime Kiln plant was sold to M/s. JK Envirotech Limited but the same remains situated within the factory premises of the appellant. Therefore, there is no physical removal of the capital goods from the factory premises of the appellant. From the plain reading of sub Rule (5A) of Rule 3 of Cenvat Credit Rules, 2004, it is clear that the assessee is required to pay duty on the use of capital goods only when it is removed from the factory of the assessee - In the present case, since the plant was remained installed in the factory of the appellant and moreover the same was undisputedly used for conversion of lime sludge into lime and the said lime was used in the manufacture of the final product of the appellant. The demand in terms of sub-Rule (5A) of Rule 3 of Cenvat Credit Rules, 2004 is not legal and correct. In the present case, first the capital goods was not removed from the factory consequently the same was exclusively used in or in relation to manufacture of final product of the appellant. Therefore, in this position, Rule 3(5A) has no application. The Revenue s only contention is that since the capital goods were sold by the appellant to M/s. JK Envirotech Limited and the ownership of the same stood transferred to M/s. JK Envirotech Limited the appellant is not entitled for Cenvat credit in terms of Rule 3(5A) of Cenvat Credit Rules - It is made clear that, for the purpose of taking Cenvat credit and even for manufacture of finished goods, ownership has no criteria. The only requirement is that the capital goods should be used in the manufacture of final product within the factory of the appellant which is not disputed in the present case. This issue has been examined time and again by this Tribunal in various judgments. In the case of M/S. L.G. BALAKRISHNAN AND BROS LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, TRICHY 2016 (6) TMI 829 - CESTAT CHENNAI where it was held that when there is no removal of goods under cover of invoice, as provided under rule 9, there is nothing in Rule 3 (5) to invoke the deeming fiction as insisted by the department. In the case of CCE ST, Raipur vs. Bhilai Steel Plan case 2017 (7) TMI 1120 - CHHATTISGARH HIGH COURT , the Hon ble Chhattisgarh high court held that It is accordingly held, even on assimilation of facts that removal in the case in hand does not include any fiscal removal of goods from one place to other. In view of the above judgments, the law is settled that even though the ownership of the capital goods has been changed but the capital goods remained installed and used within the factory premises of the assessee, the Cenvat credit cannot be demanded under Rule 3(5A) of Cenvat Credit Rules, 2004. Following the above decisions coupled with the observations, it is opined that the demand of Cenvat credit of capital goods in the present case made under Rule 3(5A) is not sustainable. Demand of Cenvat credit in respect of input service used in relation to the activity of conversion of lime sludge into lime by M/s. JK Envirotech Limited - HELD THAT - Even though the input service was used in the processing related to conversion of lime sludge into lime but the same was directly connected to manufacture of final product of the appellant. Undisputedly the billing of said services are in the name of the appellant therefore, the condition prescribed under Rule 2(l) which defines input service scrupulously fulfilled inasmuch as the input service was purchased by the appellant and the same was used in or in relation to manufacture of the final product of the appellant. In case of Cenvat on service, the location is not criteria for allowing credit - the demand on the same is not sustainable. Extended period of limitation - HELD THAT - The appellant and categorically informed the department about entire fact of availing credit on capital goods and despite the same was sold/ billed to M/s. J.K Envirotech, hence there is no suppression of fact on the part of the appellant, accordingly the demand for extended period is not sustainable also on time bar. Personal penalty imposed on Shri Surendra Behani, General Manager - HELD THAT - Since the appeals are being allowed on merit, the personal penalty imposed on Shri Surendra Behani, General Manager is also not sustainable. Appeal allowed - decided in favour of appellant.
Issues Involved:
1. Demand of Cenvat credit on capital goods sold to M/s. JK Envirotech Limited. 2. Demand of Cenvat credit on input services used at M/s. JK Envirotech Limited. 3. Allegations of suppression of facts and time-bar for the demand. Summary: 1. Demand of Cenvat Credit on Capital Goods Sold to M/s. JK Envirotech Limited: The appellant, engaged in manufacturing paper products, sold a Lime Kiln plant to M/s. JK Envirotech Limited but retained its location within their factory premises. The department raised a demand under Rule 3(5A) of Cenvat Credit Rules, 2004, arguing that the sale constituted a deemed removal of capital goods. The Tribunal found that since the Lime Kiln plant remained within the factory and was used in the manufacture of the final product, there was no physical removal of capital goods. Therefore, Rule 3(5A) was inapplicable. The Tribunal cited multiple judgments supporting that Cenvat credit cannot be demanded if capital goods remain installed and used within the factory premises despite a change in ownership. 2. Demand of Cenvat Credit on Input Services Used at M/s. JK Envirotech Limited: The appellant availed Cenvat credit on input services billed to them but used at M/s. JK Envirotech Limited for converting lime sludge into lime, which was used in the appellant's final product. The Tribunal held that the service was directly connected to the manufacture of the final product, and since the billing was in the appellant's name, the conditions under Rule 2(l) defining input service were fulfilled. Consequently, the demand was not sustainable. 3. Allegations of Suppression of Facts and Time-Bar for the Demand: The appellant had informed the department in 2008 about availing credit on the Lime Kiln plant sold to M/s. JK Envirotech Limited. The Tribunal found no suppression of facts as the sale was reflected in the balance sheet, and the department raised no objections initially. Therefore, the demand for the extended period was also unsustainable on the grounds of being time-barred. Conclusion: The Tribunal set aside the impugned orders, allowed all appeals, and ruled that the demands under Rule 3(5A) and for input services were not sustainable. The personal penalty imposed on the General Manager was also deemed unsustainable. The appeals were allowed with consequential relief in accordance with the law.
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