2013 (11) TMI 1123 - AT - Central Excise

Reversal of Capital goods Waiver of Pre-deposit Held that - The question of availability of capital goods Cenvat credit to M/s K. Three Pvt. Ltd. in respect of the used moulds and dies received by them from M/s L.G. Electronics cannot be determined by reviewing the assessment at the supplier s end, unless the assessment at the end of M/s L.G. Electronics has been reviewed by the jurisdictional Central Excise authorities - In any case, it is a Revenue neutral situation Thus, the requirement of pre-deposit of Cenvat credit demand from M/s K. Three Pvt. Ltd. and interest and also the requirement of pre-deposit of penalty by M/s K. Three Pvt. Ltd. and M/s L.G. Electronics waived for hearing of their appeals and recovery stayed till the disposal of the appeals Stay granted.

Summary

Issues:
1. Reversal of Cenvat credit on transfer of capital goods
2. Eligibility of Cenvat credit for the recipient
3. Imposition of penalty on the parties

Analysis:
1. The issue revolved around the reversal of Cenvat credit on the transfer of capital goods from one entity to another. The appellant, a manufacturer of plastic components, received used moulds and dies from another company, which had initially taken Cenvat credit on these goods. The appellant argued that the original supplier had reversed the entire credit instead of the required percentage, making the recipient eligible for the full credit. The department contended that the reversal should have been done at a reduced rate per quarter as per the Cenvat Credit Rules. A demand for Cenvat credit was imposed on the recipient, along with interest and penalties, which were upheld by the Commissioner (Appeals).

2. The appellant's counsel argued that the recipient was entitled to the full Cenvat credit as the original supplier had reversed the credit in full, as per the rules in place at the time of the transfer. They highlighted that it was a revenue-neutral situation and requested a waiver of the pre-deposit requirements for the appeal. On the other hand, the Departmental Representative opposed the appeal, stating that the reversal should have been done at the reduced rate as per the Cenvat Credit Rules applicable at the time of transfer.

3. In the judgment, it was noted that the determination of the availability of Cenvat credit for the recipient should not solely rely on the assessment at the supplier's end. The tribunal found it to be a revenue-neutral situation and waived the pre-deposit requirements for the appeal, allowing a stay on the recovery of the demanded amount and penalties until the appeal's final disposal. The stay applications were allowed, considering the circumstances and arguments presented by both parties.

This detailed analysis of the judgment provides insights into the legal complexities surrounding the reversal of Cenvat credit on the transfer of capital goods and the eligibility of the recipient for the credit, as well as the imposition of penalties on the parties involved.