2024 (8) TMI 473 - AT - Central Excise

CENVAT Credit - Removal of capital goods - Depreciation - date from which the deduction of 2.5% has to be applied - whether the amount arrived at by the appellant for clearances of capital goods on which credit was availed is correct or whether the demand of differential duty alleging that the appellant has to apply 2.5% deduction only on 50% of the credit availed from the date of availing credit is legal and proper? - Rule 3 (5) and Rule 3 (5A) and Rule 4(2) of CCR - time limitation. Department has worked out 35% (for the second 50%) as against the allowable deduction of 37.5% calculated by appellant from the date of availing the credit which is 22.11.2008. HELD THAT - The provisions under Rule 3 (5)/3(5A) as noticed above would show that, the words used are from the date of availing credit. Though the capital goods are received in the factory and the appellant may have put to use, the legislature in Rule 3 (5A) has consciously used the words from the date of availing the credit . It has not used the words from the date on which the capital goods were put to use or from the date of receiving the capital goods in the factory. It can be seen that the date of availing the credit has been made the relevant date for applying the deduction of 2.5%. The appellant has sought to apply the deductions on 100% from the date of availing the initial credit itself. It may be true that though capital goods are received at the same time, Rule 4 (2) restricts the availment of credit to 50% of the duty paid on capital goods in a financial year. The legislature while introducing Rule 3 (5A) was fully conscious of the existence of Rule 4 (2) also. Nothing can be read to be added in to the provisions of law, when the ordinary meaning does not give rise to any ambiguity. Though the Ld. Consultant relied upon the decision in the case of MAHINDRA UGINE STEEL CO. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE ST, NASHIK 2019 (2) TMI 755 - CESTAT MUMBAI , the facts of the case are not so clear as to whether the issue considered is the same. Time Limitation - HELD THAT - Though department has invoked the extended period there is no positive act of suppression established against the appellant. The entire figures have been taken from the accounts maintained by the appellant. As the appellant had paid the amount as calculated by them and also filed ST3 returns reflecting such reversal of credit on capital goods, there are no grounds bringing out wilful suppression of facts on part of the appellant. The show cause notice is time barred. The appellant succeeds on the ground of limitation. The impugned order is set aside on the ground of limitation - appeal allowed.

Issues Involved:

1. Correct calculation of Cenvat credit reversal on removal of used capital goods.
2. Interpretation of Rule 3(5) and Rule 3(5A) of Cenvat Credit Rules, 2004.
3. Applicability of extended period for raising the demand.
4. Revenue neutrality and its impact on the invocation of the extended period.

Issue-wise Detailed Analysis:

1. Correct Calculation of Cenvat Credit Reversal on Removal of Used Capital Goods:

The appellant is engaged in the manufacture of parts of textile machinery and had availed Cenvat credit on capital goods. Upon removal of these goods, the appellant calculated the amount to be reversed by reducing 2.5% per quarter from the date of availing the initial credit on the entire 100% of the capital goods. The department argued that the appellant should have applied the 2.5% reduction only on the 50% credit availed in the first year and the remaining 50% in the subsequent year. The appellant's method resulted in a lesser amount of duty being reversed compared to the department's calculation.

2. Interpretation of Rule 3(5) and Rule 3(5A) of Cenvat Credit Rules, 2004:

Rule 3(5) and Rule 3(5A) stipulate that when capital goods on which Cenvat credit has been taken are removed after use, the manufacturer must pay an amount equal to the Cenvat credit taken, reduced by a specified percentage per quarter. The appellant argued that the deduction should be calculated from the date of initially availing the credit, while the department contended that the deduction should apply separately to the two 50% credits availed in different financial years. The tribunal noted that the rules specify "from the date of availing the credit" and not "from the date of use," supporting the department's interpretation.

3. Applicability of Extended Period for Raising the Demand:

The appellant contended that the issue was purely interpretational, and there was no positive act of suppression. The tribunal agreed, noting that the entire figures were taken from the appellant's accounts and that the appellant had already paid the duty amount calculated by their method. The show cause notice was issued based on a difference in the method of calculation, and the tribunal found no grounds for wilful suppression of facts. Consequently, the tribunal held that the invocation of the extended period was not justified, making the show cause notice time-barred.

4. Revenue Neutrality and Its Impact on the Invocation of the Extended Period:

The appellant argued that the situation was revenue neutral as the duty paid on the transferred capital goods was availed as Cenvat credit by their own unit. The tribunal referred to previous decisions, including Anglo French Textiles vs. CCE Pondicherry, where the demand was set aside on the ground of revenue neutrality. The tribunal concluded that the issue was interpretational, and the extended period could not be invoked due to the revenue-neutral situation and lack of suppression.

Conclusion:

The tribunal set aside the impugned order on the ground of limitation, allowing the appeal with consequential reliefs. The appellant succeeded on the ground that the show cause notice was time-barred, given the interpretational nature of the issue and the absence of any positive act of suppression. The order was pronounced in the open court on 29.07.2024.

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