2017 (7) TMI 442 - AT - Central Excise

Removal of capital goods after use - whether the removal of capital goods after use would attract excise duty in terms of Rule 3(5) of Cenvat Credit Rules, 2004 during the period January 2005 to May 2005? - Held that - the excise duty is only payable on the capital goods if removed as such that means without installation and putting to use - In the present case, since the capital goods were admittedly installed and used for substantial period, only thereafter it was removed, Rule 3(5) of Cenvat Credit Rules, 2004 is inapplicable - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Whether the removal of capital goods after use attracts excise duty under Rule 3(5) of Cenvat Credit Rules, 2004 from January 2005 to May 2005.

Analysis:
1. Argument by Appellant's Advocate:
- The appellant's advocate argued that as per Rule 3(5), duty is required to be paid only on the removal of capital goods "as such," which implies without installation or use. Citing various judgments, the advocate contended that once capital goods are used for a substantial period, they do not remain "as such." Therefore, the duty is not applicable in this case.

2. Revenue's Submission:
- The revenue representative maintained that even after use, the nature of capital goods remains the same, warranting the payment of duty upon removal. They argued that the provision of Rule 3(5) applies in this scenario, and the appellant should have paid duty on the removal of the used capital goods.

3. Tribunal's Analysis:
- The tribunal examined Rule 3(5) and emphasized that duty is only payable when capital goods are removed "as such," meaning without installation or use. The tribunal agreed with the appellant's interpretation that once capital goods are installed and used, they do not remain "as such." The tribunal referenced the Cummins India case to support this interpretation. Consequently, the tribunal ruled that the demand for duty on the removal of capital goods that were used and then removed is not sustainable under Rule 3(5).

4. Conclusion:
- The tribunal set aside the impugned order, allowing the appeal and determining that excise duty is only applicable when capital goods are removed "as such," i.e., without installation and use. Since the capital goods in question were used for a substantial period before removal, Rule 3(5) of Cenvat Credit Rules, 2004 does not apply, making the demand for duty invalid.

This detailed analysis of the judgment highlights the interpretation of Rule 3(5) regarding the payment of excise duty on the removal of capital goods after use, providing a comprehensive understanding of the tribunal's decision.