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2015 (10) TMI 847 - AT - Central ExciseReversal of Credit / Demand of duty - removal of Capital goods after use on which no credit was taken initially - Held that - During the relevant period that capital goods on which CENVAT Credit has been taken are removed from the factory of the manufacturer of final product is required to pay an amount equivalent to the duty of excise on the said capital goods on removal. As is noted from the facts that the appellant here-in had not manufactured any goods at the factory premises, which were purchased by them along with capital goods. It is also to be noted that when CENVAT Credit is availed by the manufacturer and is not contested by the department during the material period and credit was availed, the purchaser of the capital goods cannot be saddled with the duty liability of CENVAT Credit which was availed by the original manufacturer as I do not find any provisions of law which indicate so - main appellant has purchased the capital goods from M/s. McCoy and had not availed benefit of CENVAT Credit on the capital goods by the said M/s. McCoy. In my considered view, the department should have demanded the Central Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets they have parted with the capital goods on which CENVAT Credit was availed. There was a transfer of running industrial unit to the appellant there-in hence the High Court has come to a conclusion that the successor is liable to discharge the excise dues. In the case in hand, there is no excise dues which have been confirmed against the seller of the capital goods namely M/s. McCoy. In the absence of there being any dues that has been confirmed against M/s. McCoy, the same cannot be recovered from the main appellant - impugned order which confirmed the demand of duty as ineligible CENVAT Credit is unsustainable and liable to be set aside - Decided in favour of assessee.
Issues Involved:
1. Demand of CENVAT Credit availed by the appellant's predecessor. 2. Transfer of capital goods to a sister concern and the associated duty liability. 3. Interpretation and applicability of CENVAT Credit Rules, 2002 and 2004. 4. Imposition of penalties and interest on the appellants. Issue-wise Detailed Analysis: 1. Demand of CENVAT Credit availed by the appellant's predecessor: The main appellant, M/s. Hindustan Coca-Cola Beverages Pvt. Ltd., had purchased capital goods from M/s. McCoy Bottling Company Pvt. Ltd. under an asset purchase agreement. The department contended that the appellant should have discharged the duty on the value of the capital goods cleared "as such" based on the Valuation Rules. The appellants argued that no CENVAT Credit was availed on these capital goods by them, as the credit was availed by M/s. McCoy. The adjudicating authority confirmed the demand, which was upheld by the first appellate authority. However, the Tribunal found that the main appellant had not availed any CENVAT Credit on the capital goods procured from M/s. McCoy and that the department should have demanded the duty from M/s. McCoy, not the appellant. 2. Transfer of capital goods to a sister concern and the associated duty liability: The main appellant transferred the purchased capital goods to their sister concern. The department argued that the appellant was required to pay Central Excise duty equivalent to the CENVAT Credit availed by M/s. McCoy. The Tribunal, however, noted that the main appellant had only purchased the assets and not the running unit of M/s. McCoy. There was no transfer of business or responsibility towards liabilities of M/s. McCoy. The capital goods were used by M/s. McCoy for manufacturing and clearing dutiable final goods, and there was no balance of CENVAT Credit in M/s. McCoy's statutory records at the time of sale. 3. Interpretation and applicability of CENVAT Credit Rules, 2002 and 2004: The Tribunal examined the provisions of Rule 57AB (1C) of the Central Excise Rules, 1944, and Rule 3(4) of the Cenvat Credit Rules, 2002. The rules state that when capital goods on which CENVAT Credit has been taken are removed "as such," the manufacturer must pay an amount equal to the duty of excise. The Tribunal found that the appellant had not manufactured any goods at the purchased factory premises and had not availed CENVAT Credit on the capital goods. The department's demand should have been directed at M/s. McCoy, who availed the credit and sold the assets. The Tribunal also referred to the Karnataka High Court's judgment in Solectron Centum Electronics Ltd., which clarified that liability to pay duty on capital goods arises only when the goods are removed "as such" without being used. Since the capital goods in question were used by M/s. McCoy, the appellant was not liable to reverse the CENVAT Credit. 4. Imposition of penalties and interest on the appellants: Given that the Tribunal set aside the demand of duty as ineligible CENVAT Credit, the imposition of penalties and interest on the appellants was deemed unsustainable. The Tribunal found that the first appellate authority's interpretation of the Cenvat Credit Rules was incorrect, as the main appellant had not utilized the CENVAT Credit of the capital goods received from M/s. McCoy. Conclusion: The Tribunal set aside the impugned order, finding it unsustainable, and allowed the appeals. The demand of duty as ineligible CENVAT Credit was dismissed, and the associated penalties and interest were also set aside. (Order pronounced in Court on 13.4.2015)
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