2024 (10) TMI 618 - AT - Central Excise

CENVAT Credit - capital goods removed from the factory - Applicability of concept of transaction value to the goods which are not manufactured by the respondent - interpretation of Rule 3 (5A) (ii) of Cenvat Credit Rules, 2004 - HELD THAT - It is evident from the impugned order that the Commissioner (Appeals) completely misread Rule 3 (5A) of CCR under which the demand was confirmed. The Commissioner (Appeals) also committed an error in treating the expression transaction value as assessable value on which duty is paid. Transaction value is the amount paid by one person to another for the goods or services received. Therefore, if the respondent had sold its capital goods to another company, there will be a transaction value i.e., the price for which it had sold the used capital goods. A plain reading Rule 3 (5A) of CCR leaves no manner of doubt that there would be a transaction value when goods are sold, even if such goods are not manufactured by the seller. This is a fit case to be remanded back to the Commissioner (Appeals) to examine Rule 3 (5A) of CCR as applicable during the relevant period and also examine what is value of the capital goods on which the respondent had taken capital goods CENVAT credit. The matter is remanded to the Commissioner (Appeals) to decide the appeal afresh considering the submissions made by the respondent and also the legal provisions as applicable during the relevant period - Appeal allowed by way of remand.

Summary

Issues:
Interpretation of Rule 3 (5A) of Cenvat Credit Rules, 2004 regarding payment on removal of capital goods, applicability of transaction value, consideration of depreciation, eligibility for Cenvat credit on goods sold, and remand of the case for re-examination.

Analysis:
The appeal before the Appellate Tribunal CESTAT NEW DELHI challenges the order-in-appeal passed by the Commissioner (Appeals), Jodhpur, concerning the payment under Rule 3 (5A) of Cenvat Credit Rules, 2004. The case revolves around the purchase of capital goods by M/s Raipur Forging Pvt. Ltd. from M/s Ajmera Steels Pvt. Ltd., originally removed from M/s Stainless India Ltd. The Superintendent of Central Excise, Range - III, Jodhpur, requested the respondent to pay an amount under Rule 3 (5A) due to the removal of capital goods on which Cenvat credit was taken. The subsequent show cause notice led to the order-in-original by the Joint Commissioner, which was overturned by the Commissioner (Appeals) through the impugned order.

The department argues that when capital goods on which Cenvat credit has been taken are removed after usage, the assessee must pay an amount under Rule 3 (5A) of CCR, calculated based on depreciation through a straight-line method. The dispute arises from the application of the proviso under Rule 3 (5A) prior to 23.09.2013, which states that if the calculated amount is less than the transaction value of the goods, the payment shall be equal to the duty leviable on the transaction value. The department contends that the respondent, who used the goods for 10 years before removal, should pay an amount equal to 12.36% of the transaction value, totaling Rs. 1,42,70,575/- along with interest and penalty.

The Commissioner (Appeals) set aside the Joint Commissioner's order, stating that the concept of "transaction value" does not apply to goods not manufactured by the respondent. However, the Appellate Tribunal finds that the Commissioner misinterpreted Rule 3 (5A) of CCR, emphasizing that the expression "transaction value" is distinct from "assessable value." The Tribunal clarifies that transaction value refers to the amount paid for goods or services received, applicable even if the goods were not manufactured by the seller. Furthermore, the Tribunal acknowledges the respondent's argument that goods not eligible for Cenvat credit during the relevant period should not be subject to the Rule 3 (5A) demand.

Consequently, the Tribunal allows the appeal, setting aside the impugned order and remanding the case to the Commissioner (Appeals) for a fresh examination. The Commissioner is directed to reevaluate Rule 3 (5A) of CCR during the relevant period and determine the value of capital goods for which the respondent availed Cenvat credit. The cross-objection filed by the respondent is also disposed of in light of the remand for further assessment and consideration of legal provisions applicable at the relevant time.