2019 (10) TMI 1206 - AT - Central Excise

Transfer of capital goods stock from one unit to another - whether duty equal to credit is payable on clearance of Cenvat availed Capital Goods by the from the Appellants or duty is payable at the rate and value prevalent on the date of clearance, deeming that the capital goods are manufactured by the appellants? - time limitation - revenue neutrality - benefit of depreciation - HELD THAT - CBEC vide circular No 643/34/2002-CX dated 01.07.2002 holds that in that case, it would be reasonable to adopt the value shown in the invoice on the basis of which Cenvat Credit was taken by the assessee in the first place. In respect of Capital Goods adequate depreciation may be given as per the rates fixed in Letter F. No. 495/16/93-Cus IV dated 26-5-1993, issued on the customs side. Further CBEC Circular No. 813/10/2005-CX dated 25-4-2005 confirms that in respect of removal of Capital goods on which credit has been taken under erstwhile sub Rule 1C of 57(AB) of CER,1944 or under Rule 3(4) of Cenvat Credit Rules, 2001 or 2002, the provisions of Rule 3(5) of Cenvat Credit Rules would apply. The learned commissioner finds that the above circulars will be applicable only for the period prior to 01.07.2002 and at the time of clearance Rule 3(4) was operational. The tribunal in the case of Siddharth Tubes ltd. 2008 (2) TMI 247 - CESTAT NEW DELHI held that We find that no evidence has been brought on record to show that the unit no.1 has partly sold the inputs HR coils to the independent buyers at higher price. Therefore, the action of unit no. 1 to reverse the credit taken on the inputs cleared as such to the unit no. 2 in terms of the highlighted portion of the boards circular dated 1/07/2002 can t be faulted. Extended period of limitation - HELD THAT - The appellants have been regularly submitting the ER-1 and regular audit of the appellants was also being undertaken. No case of deliberate suppression of facts etc. has been made out by the department. Arguably, there were frequent changes of the law and different circulars were issued by CBEC during the relevant time. Therefore, there is scope for a different interpretation by the appellants. However, for this reason extended period cannot be invoked - the issue is barred by limitation. Benefit of Depreciation - revenue neutrality - HELD THAT - The appellants have raised the issues of not allowing the benefit of depreciation and Revenue Neutrality - there are no reason to look in to those issues in view of the conclusions on merits and limitation. The appeal allowed on merits as well as on limitation.

Summary

Issues:
Whether duty equal to credit is payable on clearance of Cenvat availed Capital Goods by the Appellants or duty is payable at the rate and value prevalent on the date of clearance, deeming that the capital goods are manufactured by the appellants, and whether the demand is barred by limitation.

Analysis:

Issue 1: Duty Payable on Clearance of Cenvat Availed Capital Goods
The case involved a demand for duty on capital goods stock transferred between units. The department argued for duty payment at the prevalent rate during clearance, while the appellants contended that the duty paid initially was more than required. The appellants cited legal fictions and various judgments to support their argument. The Tribunal examined Rule 3(4) of the Cenvat Credit Rules, 2001, and relevant CBEC circulars. It was noted that the issue had been addressed in previous tribunal cases, such as ABB and Siddharth Tubes, which were upheld by the Supreme Court. The tribunal agreed with the appellants' interpretation, emphasizing the restoration of the original duty position and the lack of evidence for faulting the credit reversal. The decision highlighted the absence of deliberate suppression of facts and frequent changes in laws during the relevant period, leading to a conclusion that the extended period could not be invoked.

Issue 2: Limitation Period
Regarding the limitation period, the tribunal found that the demand for duty in February and March 2002, covered under the show cause notice issued in 2006, was barred by limitation. The appellants' regular submissions of ER-1 and audits, along with changes in laws and circulars, supported the argument against invoking the extended period. The tribunal concluded that the issue was clearly barred by limitation, thereby allowing the appeal on both merits and limitation grounds.

In conclusion, the tribunal allowed the appeal, emphasizing the applicability of legal fictions, previous judgments, and the absence of deliberate suppression of facts in determining duty payment and limitation period issues. The decision provided a comprehensive analysis of the legal provisions, circulars, and precedents to support the outcome in favor of the appellants.