9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2022 (6) TMI 677 - AT - Service TaxReversal of CENVAT Credit - capital goods - transfer and merger of PIA of the appellant as per the scheme of arrangement - formation of infrastructure company to which the capital goods have been transferred - physical removal of capital goods took place or not - Rule 3(5) / Rule 3(5A) of CENVAT Credit Rules, 2004 - HELD THAT - There is no dispute that even after transfer, the capital goods are continued to be used by the appellant for providing output service. The Tribunal in the appellant s own case has analyzed the very same issue. The Tribunal relied upon the decision of the Hon'ble Supreme Court in the case of JK. COTTON SPINNING AND WEAVING MILLS LTD. AND ANOTHER VERSUS UNION OF INDIA AND OTHERS 1987 (10) TMI 51 - SUPREME COURT to observe that removal means physical and actual removal of the goods from the factory to any other place - In the present case, there is no physical removal of capital goods from the premises of the appellant - In para 9 of the said order, the Tribunal held that appellant is not required to reverse the CENVAT credit as the capital goods have not been physically removed from the premises where they were initially installed. The demand cannot sustain. The impugned order is set aside - Appeal allowed - decided in favor of appellant.
Issues:
1. Whether the appellant is liable to reverse the credit on capital goods following the demerger and transfer of Passive Infrastructure Assets (PIA) to a new legal entity. 2. Interpretation of Rule 3(5) of CENVAT Credit Rules, 2004 regarding the reversal of credit on capital goods. 3. Application of judicial precedents in similar cases to determine the liability to reverse CENVAT credit. Analysis: *Issue 1: Liability to Reverse Credit on Capital Goods* The case involved M/s. Vodafone Cellular Ltd. (VCL) demerging its Passive Infrastructure Assets (PIA) to a new legal entity, M/s. Vodafone Essar Infrastructure Ltd. The dispute arose when the department demanded the reversal of credit availed on capital goods under Rule 3(5) of CENVAT Credit Rules, 2004. The appellant argued that as the capital goods were not physically removed and continued to be used for output services, the reversal was not required. The Tribunal, relying on the Supreme Court's decision in J.K. Spinning and Weaving Mills Ltd. vs. Union of India, held that physical removal is essential for credit reversal. As there was no physical removal in this case, the Tribunal concluded that the appellant was not liable to reverse the credit. *Issue 2: Interpretation of Rule 3(5) of CENVAT Credit Rules* The interpretation of Rule 3(5) was crucial in determining the liability to reverse the credit on capital goods. The appellant argued that the rule mandates reversal only upon physical removal of goods from the factory, which did not occur in this case. The Tribunal analyzed the language of the rule and the proviso exempting reversal when goods are used outside the premises for providing output services. By considering the specific circumstances and legal provisions, the Tribunal concluded that the rule did not apply in the absence of physical removal. *Issue 3: Application of Judicial Precedents* Both parties cited judicial precedents to support their arguments. The appellant relied on the decision of the Chandigarh Bench of the Tribunal, which aligned with their position that physical removal was necessary for credit reversal. The department referenced the decision of the Karnataka High Court in Commissioner of Central Excise vs. Associated Cement Co. Ltd., emphasizing the concept of 'removal' as physical movement. However, the Tribunal, following consistent precedents and legal principles, held that the absence of physical removal meant the appellant was not obligated to reverse the CENVAT credit. In conclusion, the Tribunal set aside the impugned order, allowing the appeal and relieving the appellant from the demand to reverse the CENVAT credit on capital goods. The decision was based on a comprehensive analysis of the legal provisions, precedents, and the specific circumstances of the case.
|
