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2023 (5) TMI 932 - AT - Central ExciseReversal of CENVAT Credit - removal of capital goods - case of appellant is that provision of Rule 3(5) of the Cenvat Credit Rules, 2004 would not be applicable to the appellant s case as the goods has been used before the same work removed - HELD THAT - It is not in dispute that the capital goods on which the credit was availed, has been removed after some use. It is notice that Rule 3(5) and Rule 3(5A) Cenvat Credit Rules, 2004 deal with the obligation of a personal availing credit when that person removes the capital goods on which the credit has been availed. From the sequence of events, it apparent that there was no Rule for reversal of Cenvat Credit on capital goods cleared after some use. Similar case has been examined by Tribunal in the case of RAGHAV ALLOYS (P) LTD 2009 (4) TMI 184 - CESTAT, NEW DELHI wherein it was held that If the Department s view is accepted, it would lead to absurd results as even when the cenvated capital goods are cleared after long years of use at a small practice of their original value, still full Cenvat credit originally taken would be required to be reversed which would defeat the very purpose of grant of Cenvat credit facility in respect of capital goods. Hon ble High Court in the case of ROGINI MILLS LTD 2010 (10) TMI 424 - MADRAS HIGH COURT has also been examined similar issue and concluded that The capital goods on which Cenvat credit had been taken or removed after being used, the Manufacturer should pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5% for each quarter of a year or part thereof from the date of taking the Cenvat credit. It is noticed that in the instance case the appellant has reverse the Cenvat Credit equivalent to the duty on the transaction value of the capital goods cleared. Since, such reversal has been accepted by the Tribunal and the Hon ble High Court, the reversal sought by the revenue at a different rate cannot be accepted. Appeal allowed.
Issues: Appeal against demand of reversal of Cenvat Credit on removal of capital goods.
Analysis: 1. The appellant argued that Rule 3(5) of the Cenvat Credit Rules, 2004 should not apply as the goods were used before removal. They cited a case from the Hon'ble Madras High Court granting relief in similar circumstances. The Tribunal's decision in another case was also relied upon for granting relief in such situations. 2. The Learned AR relied on the impugned order, and it was observed that Rule 3(5) and Rule 3(5A) deal with the obligation to pay an amount equal to the credit availed when capital goods are removed. The Rules were analyzed, and it was noted that there was no provision for reversal of Cenvat Credit on capital goods cleared after some use. 3. The Tribunal examined a similar case where it was observed that the duty payable on the depreciated value was to be reversed when cenvated capital goods were cleared after some use. The Tribunal emphasized that the extent of use of capital goods should determine the reversal of Cenvat credit, not the full credit originally taken. 4. The Hon'ble High Court in a related case concluded that the reversal of Cenvat Credit equivalent to the duty on the transaction value of the capital goods cleared was acceptable. The Tribunal's decision was upheld, dismissing the appeal and confirming the reversal done by the appellant. In conclusion, the Tribunal allowed the appeal, noting that the reversal of Cenvat Credit accepted by the Tribunal and the Hon'ble High Court in similar cases should be upheld. The appellant's reversal equivalent to the duty on the transaction value of the capital goods cleared was deemed sufficient, and the revenue's request for a different rate of reversal was rejected.
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