2016 (5) TMI 1070 - AT - Central Excise

Reversal of Cenvat Credit availed on the capital goods and removed subsequently after use - Cenvat Credit of the Central Excise duty paid on the capital goods and used the same in the factory premises - Held that - Till the law was amended as on 13-11-2007 in respect of used capital goods, there was no liability to pay duty. In fact, this is evident from the fact that in Cenvat Credit Rules, 2004, the proviso was added making the position clear which was not there in the earlier orders. The proviso was added by a Notification No. 39/2007 dated 13-11-2007. therefore, prior to 13-11-2007, there was no duty payable in respect of capital goods which was used before it is removed. In that view of the matter, second question of law is answered in favour of the assessee and against the Revenue. See Solectron Centum Electronics 2014 (10) TMI 596 - KARNATAKA HIGH COURT

Issues involved:
1. Availment of Cenvat Credit on capital goods and subsequent removal without reversal.
2. Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004.
3. Applicability of judicial precedents on the issue.
4. Determination of liability for reversal of Cenvat Credit.

Issue 1: Availment of Cenvat Credit on capital goods and subsequent removal without reversal:
The appellant availed Cenvat Credit on capital goods and later removed them from the factory without reversing the credit. A show cause notice was issued demanding the reversal of Cenvat Credit, interest, and imposition of penalty. The Adjudicating Authority confirmed the demand, stating that the appellant should reverse the credit since the capital goods were removed as such.

Issue 2: Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004:
The appellant argued that Rule 3(5) mandates the reversal of Cenvat Credit only when capital goods are removed as such without being used. The rule underwent a change in 2007, and the appellant relied on the interpretation of similar provisions by the Hon'ble High Court of Karnataka in a relevant case.

Issue 3: Applicability of judicial precedents on the issue:
The appellant cited the decision of the Hon'ble High Court of Karnataka in a specific case where the court clarified that the term "Capital goods as such" refers to only unused capital goods. Various other High Court judgments were also referenced to support the appellant's contention regarding the interpretation of the term "as such" in the context of Cenvat Credit Rules.

Issue 4: Determination of liability for reversal of Cenvat Credit:
After considering arguments from both sides and perusing the records, the Tribunal analyzed whether the appellant was required to reverse the Cenvat Credit availed on the capital goods removed from the factory. The Tribunal referred to relevant legal provisions and judicial precedents to determine the liability for the reversal of Cenvat Credit in this particular case.

In the detailed analysis, the Tribunal examined the provisions of Rule 3(5) of Cenvat Credit Rules, 2004, and the relevant judicial precedents to conclude that the appellant was not liable to reverse the Cenvat Credit on the capital goods removed from the factory. The Tribunal found merit in the appellant's argument that the rule necessitates reversal only when capital goods are removed as such without being utilized. Citing the decision of the Hon'ble High Court of Karnataka and other High Court judgments, the Tribunal held that until the law was amended in 2007, there was no duty payable on capital goods that were used before removal. The Tribunal emphasized that the term "as such" should be interpreted in the context of whether the capital goods were unused at the time of removal.

Moreover, the Tribunal distinguished the judgments cited by the departmental representative, noting that they did not directly address the specific issue at hand. The Tribunal highlighted the chronological precedence of the Hon'ble High Court of Karnataka's judgment over the other decisions, emphasizing the significance of the latest judicial pronouncement. By aligning with the interpretation provided by the Karnataka High Court and other relevant judgments, the Tribunal ruled in favor of the appellant, allowing the appeal and setting aside the impugned order.

This comprehensive analysis showcases the Tribunal's meticulous review of legal provisions, precedents, and the specific circumstances of the case to arrive at a well-reasoned decision in favor of the appellant regarding the reversal of Cenvat Credit on the capital goods removed from the factory.

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