2017 (11) TMI 22 - AT - Central Excise

Whether the appellant is liable to pay Central Excise duty by way of reversal under the provisions of Rule 3(5) of Cenvat Credit Rules, 2004? Held that - it is an admitted fact that the appellant have cleared/used capital goods which are further usable for another manufacture. Accordingly, under the provisions of Rule 3(5) of CCR, 2004, the appellant is entitled to deduction of 2.5% per quarter from the date of credit till the date of disposal on the amount of Cenvat credit taken at the time of acquisition/erection of the capital goods in question. Accordingly, the appellant is only liable to pay an amount of ₹ 44,151/- towards the duty, by way of reversal under Rule 3(5) of CCR, 2004 - the appellant is entitled to refund of the balance amount deposited under protest, which is evident on the face of the record - appeal allowed in part.

Summary

Issues:
1. Liability to pay Central Excise duty under Rule 3(5) of Cenvat Credit Rules, 2004.

Analysis:
The case revolved around the issue of whether the appellant was liable to pay Central Excise duty under Rule 3(5) of Cenvat Credit Rules, 2004. The officers found used capital goods being removed without discharging duty liability, leading to the initiation of proceedings. It was revealed that the appellant had availed Cenvat credit on the capital goods in question. The appellant initially assessed the capital goods as scrap with nil duty but later corrected this by assessing Central Excise duty and paying an amount of &8377; 28,92,830. The appellant's actions raised suspicions of malafide intention to evade duty, invoking an extended period for service of show cause notice and penalty provisions under the Central Excise Act, 1944. The show cause notice demanded the recovery of Central Excise duty and imposed penalties. The Additional Commissioner confirmed the demand for Central Excise duty and appropriated the amount already deposited. The appellant contested this decision before the Commissioner (Appeals) and subsequently appealed to the Tribunal.

The appellant argued that the demand under Rule 3(5A) of Cenvat Credit Rules, 2004 was incorrect as the capital goods were used. They sought the benefit of a deduction of 2.5% per quarter on a straight-line basis for the Cenvat credit availed on the capital goods. The appellant referenced a previous tribunal ruling supporting their position. They also contended that the provisions of Section 11D of the Central Excise Act were not applicable in this case. The appellant highlighted discrepancies between the show cause notice and the Order-in-Original, arguing that the demand was beyond the scope of the notice. The appellant relied on a Supreme Court ruling emphasizing that demands cannot exceed the allegations in the show cause notice.

The revenue authority upheld the demand for Central Excise duty under Rule 3(5) of Cenvat Credit Rules, 2004, and Section 11A of the Act. They argued that the appellant was required to pay an amount equal to the Cenvat credit taken on the capital goods, reduced by 2.5% for each quarter. The revenue authority justified the confirmed duty amount and the balance demanded under Section 11B of the Central Excise Act.

The Tribunal considered the arguments and facts presented. It acknowledged that the appellant had used capital goods suitable for further manufacturing. Under Rule 3(5) of Cenvat Credit Rules, 2004, the appellant was entitled to a deduction of 2.5% per quarter from the date of credit acquisition till disposal. The Tribunal held that the appellant was liable to pay &8377; 44,151 towards duty under Rule 3(5) of Cenvat Credit Rules, 2004. It also ruled that there was no deemed collection of duty beyond this amount. Consequently, the Tribunal allowed the appeal in part, confirming the duty amount and ordering a refund of the excess amount deposited. The Adjudicating authority was directed to process the refund within 60 days from the date of the order.