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2010 (3) TMI 598 - AT - Central ExciseCenvat Credit - cleared capital goods to their another unit - capital goods used for a period of more than 7 to 8 years - while procuring the said capital goods, the appellants had availed the credit - short payment of duty - whether the goods, which were removed from the factory would be liable to pay the duty equivalent to the amount of the credit which was availed initially when the goods were procured - or the same shall be after taking into consideration the wear and tear of the capital goods Held that - pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5 per cent for each quarter of the year or part thereof from the date of taking Cenvat credit.
Issues Involved:
1. Validity of the demand for differential duty under Rule 3(5) of the CENVAT Credit Rules, 2004. 2. Interpretation of the term "as such" in Rule 3(5) concerning the removal of capital goods. 3. Applicability of precedents and judicial interpretations to the present case. Issue-wise Detailed Analysis: 1. Validity of the demand for differential duty under Rule 3(5) of the CENVAT Credit Rules, 2004: The appellants challenged the order of the Commissioner (Appeals), which upheld the Additional Commissioner's decision confirming a demand of Rs. 11,07,117. The demand was based on the allegation that the appellants violated Rule 3(5) of the CENVAT Credit Rules, 2004 by not paying duty equivalent to the credit availed when capital goods were removed. The appellants had initially availed credit of Rs. 17,95,117 on the capital goods but paid only Rs. 6,88,000 upon removal, leading to the differential duty demand. 2. Interpretation of the term "as such" in Rule 3(5) concerning the removal of capital goods: The core issue was whether the term "as such" in Rule 3(5) required the appellants to pay duty equivalent to the credit initially availed, regardless of the wear and tear of the capital goods. The appellants argued, citing precedents, that "as such" should be interpreted to mean goods removed in their original form without use. They contended that used capital goods should not attract the same duty as when they were new, and the duty should consider depreciation. 3. Applicability of precedents and judicial interpretations to the present case: The appellants relied on several judicial decisions, including Cummins India Ltd. v. CCE, Raghav Alloys (P.) Ltd. v. CCE, and Geeta Inds. (P.) Ltd. v. CCE, which supported the view that the term "as such" should be interpreted to mean goods in their original, unused state. These decisions emphasized that requiring full reversal of credit for used goods would lead to absurd results and defeat the purpose of CENVAT credit provisions. The Department, on the other hand, relied on the Larger Bench decision in Modernova Plastyles (P.) Ltd. v. CCE, which interpreted "as such" to include both used and unused goods. However, the Tribunal noted that this interpretation was not directly applicable to the present case, as it dealt with a different context under Rule 4(5)(a). Conclusion: The Tribunal concluded that the interpretation of "as such" in Rule 3(5) should consider the context and the purpose of the CENVAT Credit Rules. It upheld the view that used capital goods should not require full reversal of credit and that duty should be based on the depreciated value of the goods. The Tribunal set aside the impugned order, confirming that the duty liability was correctly assessed and paid by the appellants. The appeal was disposed of in favor of the appellants, aligning with the judicial precedents and the legislative intent behind the CENVAT Credit Rules.
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