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2024 (8) TMI 11 - HC - Central ExciseInterpretation of statute - expression capital goods cleared as such includes capital goods cleared as such after being used in terms of Rule 3(4) of the Cenvat Credit Rules, 2002 or not - Whether a two member bench of the Tribunal could have adopted an interpretation of the phrase as such which is different from the interpretation given by a Larger Bench of the Tribunal in the case of MODERNOVA PLASTYLES PVT. LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD 2008 (10) TMI 51 - CESTAT, MUMBAI ? HELD THAT - The appellant has paid duty on the depreciated value of the capital goods. Thus, the duty has been discharged on depreciated value, therefore, the reversal of credit will be confined to the extent of use of capital goods i.e. value of the capital goods will be depreciated based on its use over the period of use. Keeping in view the above ruling of the High Court, as the removal cannot be treated as removed as such , therefore, the duty has to be discharged on the depreciated value. Accordingly, the view taken by the Customs, Excise Service Tax Appellate Tribunal in its order dated 07.07.2011 would go contrary to the law as held in COMMISSIONER CENTRAL EXCISE COMMISSIONERATE VERSUS M/S RAGHAV ALLOYS LTD. 2010 (4) TMI 294 - PUNJAB HARYANA HIGH COURT . Appeal allowed.
Issues:
1. Interpretation of the phrase "capital goods cleared as such" under Rule 3(4) of the Cenvat Credit Rules, 2002. 2. Validity of different interpretations by a two-member bench of the Tribunal compared to a Larger Bench. 3. Determining duty liability on capital goods cleared after use based on the principle of depreciation. Issue 1 - Interpretation of "capital goods cleared as such": The Division Bench of the High Court analyzed whether the term "capital goods cleared as such" includes goods cleared after being used, emphasizing that capital goods retain their identity until they become in-serviceable. The purpose of Cenvat Credit for capital goods is to prevent duty cascading, and clearing machines after utilization does not qualify as clearing "as such." The court referred to a proviso in Rule 3(5) of the Cenvat Credit Rules and a circular clarifying the valuation of goods cleared after use. Upholding previous decisions, the court concluded that the appellant's duty liability should be based on the depreciated value of the capital goods. Issue 2 - Validity of different interpretations by Tribunal benches: The court addressed the issue of conflicting interpretations by different Tribunal benches regarding the phrase "as such." It highlighted the importance of consistency in interpreting legal provisions to avoid misuse of the scheme. By referring to previous decisions and circulars, the court emphasized the distinction between clearing capital goods without use and clearing them after utilization. Upholding the Tribunal's decision in favor of the appellant, the court dismissed the Revenue's appeal as lacking merit. Issue 3 - Determining duty liability based on depreciation: The judgment clarified that duty liability on capital goods cleared after use should be calculated based on the depreciated value, considering the period of use. The court set aside the Tribunal's order and allowed the appeal, aligning with the settled law and principles established in previous judgments. All pending miscellaneous applications were also disposed of in light of the decision. In conclusion, the High Court's judgment provided a detailed analysis of the interpretation of "capital goods cleared as such," the importance of consistent legal interpretations, and the calculation of duty liability based on depreciation for capital goods cleared after use. The decision upheld the principle that duty should be discharged on the depreciated value of goods cleared after utilization, in line with established legal precedents and circulars.
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