2012 (10) TMI 908 - AT - Central Excise

Cenvat credit removal of capital goods reversal Held that - When capital goods are removed after being put to use, it cannot be considered that the goods are removed as such and therefore, the provisions of Rule 3(5) of Cenvat Credit Rules, 2004 would not apply to such clearance and there is no need for reversing any Cenvat credit because they had actually used the capital goods in the manufacture of excisable goods - appellants have paid duty based on transaction value - appeal is allowed

Summary

Issues:
1. Whether the appellants should have reversed Cenvat credit on capital goods cleared after use?
2. Validity of the demand for excise duty and penalty imposition.
3. Applicability of Rule 3(5) of Cenvat Credit Rules, 2004 to clearance of used capital goods.
4. Interpretation of conflicting decisions by different judicial forums.

Analysis:

Issue 1: The appellants cleared capital goods after using them for a period ranging from two and a half years to seven years. The Revenue argued that the appellants should have reversed the Cenvat credit taken when the goods were received in the factory. The demand for excise duty and penalty was based on this argument.

Issue 2: The adjudicating authority confirmed the duty demand and imposed a penalty, which was later set aside by the Commissioner (Appeals). The appellants challenged this decision before the Tribunal.

Issue 3: The Counsel for the appellants contended that when capital goods are removed after use, Rule 3(5) of Cenvat Credit Rules, 2004 does not apply, as the goods are not removed "as such." They argued that there was no provision at the time for demanding duty on used capital goods. The appellants paid duty based on transaction value, and cited various decisions and High Court rulings supporting their position.

Issue 4: The Tribunal noted the contradictory interpretations of Rule 3(5) by different judicial forums. While the Revenue relied on certain Tribunal decisions to support their argument for reversing the entire credit taken, the Tribunal found that the provision was not applicable in this case. The Tribunal also considered that the appellants had already reversed credit based on transaction value, leading to the appeal being allowed in favor of the appellants.

In conclusion, the Tribunal allowed the appeal, providing consequential relief to the appellants, as it found no merit in the Revenue's arguments regarding the reversal of Cenvat credit on capital goods cleared after use. The judgment highlighted the changing legal position on the issue and the contradictory interpretations by judicial forums, ultimately siding with the appellants based on the specific circumstances of the case.