2010 (1) TMI 443 - AT - Central Excise

Cenvat Credit - The original authority holding that DG set has been cleared as such that is DG set and they ought to have paid duty equal to the credit availed by them amounting to Rs. 55,448/- and accordingly, confirmed differential duty of Rs. 34,648/- along with interest and imposed equal amount as penalty. On appeal by the party, the Commissioner (Appeals) relying on the decision of the Tribunal in the case of Madura Coats Pvt. Ltd. v. CCE, set aside the order of the original authority and allowed the appeal. Held that - there is no basis for demand of differential duty and imposition of penalty as held by the original authority. Therefore, there is no valid ground for interfering with the order of Commissioner (Appeals).

Summary

Issues:
1. Interpretation of the term "clearance as such" under Cenvat Credit Rules, 2002 and 2004.
2. Applicability of duty payment on capital goods cleared after use.
3. Consideration of rules applicable at the time of receipt and clearance of goods.
4. Impact of previous judicial decisions on the current case.

Analysis:
1. The primary issue in this case revolves around the interpretation of the term "clearance as such" under the Cenvat Credit Rules, 2002 and 2004. The Department contended that the entire credit amount should be paid by the respondent as they cleared the DG set received as capital goods. The Department relied on the decision of the Larger Bench in Modernova Plastyles Pvt. Ltd. v. CCE to support their argument.

2. On the other hand, the respondent argued that they used the DG set for over two years for its intended purpose before selling it at a lower price. The respondent maintained that the clearance of the DG set in 2006 should not be considered "as such" due to the specific provisions of the Cenvat Credit Rules, 2002 applicable at the time of receipt. The respondent also highlighted that the decision in Madura Coats Pvt. Ltd. had been upheld by the High Court, supporting their stance.

3. The Tribunal carefully considered the provisions of the Cenvat Credit Rules, 2002 and 2004 in relation to the receipt and clearance of the capital goods. The Tribunal noted that the capital goods were received during the period of the Cenvat Credit Rules, 2002 and used for over two years before being cleared under the Cenvat Credit Rules, 2004. The Tribunal accepted the respondent's argument that the valuation should be based on the rules applicable at the time of clearance, not receipt.

4. Furthermore, the Tribunal referenced the decision in Cummins India Ltd., where it was held that goods cleared after being used for a significant period should not be considered cleared "as such." The Tribunal also noted that the Department's appeal against the Cummins India Ltd. decision had been dismissed by the Bombay High Court. Considering these precedents and the specific circumstances of the case, the Tribunal upheld the order of the Commissioner (Appeals) and rejected the Department's appeal.

In conclusion, the Tribunal ruled in favor of the respondent, emphasizing the importance of applying the relevant rules at the time of clearance and considering the usage period of capital goods before determining duty payments.