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TMI Blog2010 (3) TMI 598X X X X Extracts X X X X X X X X Extracts X X X X ..... s challenge the order dated 19-6-2009 passed by the Commissioner (Appeals), Jaipur whereby he has dismissed the appeal filed by the appellants. The said appeal was filed against the order dated 30-6-2008 passed by the Additional Commissioner, Jaipur who had confirmed the demand of Rs. 11,07,117 against the appellants and had ordered the recovery thereof under rule 14 of the CENVAT Credit Rules, 2004 read with section 11A of the Central Excise Act, 1944 along with interest and had also imposed equal amount of penalty. Since the appeal against the same before the Commissioner (Appeals) did not yield fruitful result, the appellants have approached this Tribunal by this appeal. 3. The appellants are engaged in manufacture of decorative plywoods, paper based decorative laminate sheets, aluminium clad laminates and electric insulators, other laminated boards and had cleared capital goods namely "short cycle press machine" under Invoice Nos. 4325, 4326 and 4327, dated 4-10-2006. While accusing the appellants of short payment of duty to the tune of Rs. 11,07,117, a show-cause notice came to be issued to the appellants which was contested by the appellants. It is undisputed fact that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in mind the law as has been understood in terms of the decision in Cummins India Ltd.'s case (supra) read with Raghav Alloys (P.) Ltd.'s case (supra) and Geeta Inds. (P.) Ltd.'s case (supra). 7. Rule 3(5) of the CENVAT Credit Rules which was in force at the relevant time read thus:— "(5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9 : Provided that such payment shall not be required to be made where any inputs are removed outside the premises of the provider of the output service for providing the output service : Provided further that such payment shall not be required to be made when any capital goods are removed outside the premises of the provider of output service for providing the output service and the capital goods are brought back to the premises within 180 days, or such extended period a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as such, whether the amount equal to the Cenvat credit originally taken will be required to be paid even if the capital goods are cleared after use for sometime. Unlike inputs, which get consumed hundred per cent when the same are taken up for use in or in relation to the manufacture of finished products, capital goods get used up over a period of time. The capital goods lose their identity as capital goods only when after use over a period of time, the same have become unserviceable and fit to be scrapped and if they are cleared at that stage, the same cannot be said to have been cleared as such and in such a situation, the reversal of Cenvat credit taken will be required. But if the capital goods are removed after some use, at a stage in between the "unused" and "fully scrapped'", they have not lost their identity as capital goods and since on removal of totally unused capital goods, full Cenvat credit is required to be reversed and on removal of unserviceable capital goods, removal as scrap, no Cenvat credit would be required to be reversed, in case of removal of used capital goods in between unused stage and scrap stage, when the capital goods, though used, have still retaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifiable as capital goods. Tribunal in case of CCE, Ludhiana v. Nahar Fibres 2008 (84) RLT 44 (CESTAT - Delhi) : 2007 (228) ELT 855, has held that the expression - "as such" in rule 3(4) of the Cenvat Credit Rules, 2001/2002, which deals with both inputs or capital goods, is capable of being construed so as to refer only to the identity of such goods i.e., when these are capital goods, they remain such capital goods at the time of removal. A Larger Bench of the Tribunal in the case of Modernova Plastyles (P.) Ltd. v. CCE, Raigad (supra) has held that the expression "as such" in rule 4(5)(a) and rule 3(4)(c) of the Cenvat Credit Rules, 2004 means without any addition, modification or alternation, it does not have any connection with the goods being used or unused and that the "capital goods removed as such" can be the unused as well as used conditions. It is only when the capital goods have become scrap, that their identity changes and they cease to be the capital goods. Since in respect of removal of unused capital goods, as such, full amount of credit taken is required to be reversed and in case of removal of fully scrapped capital goods removed as scrap, as per the provisions of r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hitta Singh AIR 1955 SC 830. Thus when adhering to the ordinary meaning of the words used and to the grammatical construction, leads to any manifest absurdity or repugnance, the language of the statute can be modified to avoid such inconvenience. 6.3 Hon'ble Supreme Court in a recent case of CCE v. Gujarat Narmada Fertilizers Co. Ltd. 2009 (94) RLT 247 (SC) : 2009 TIOL 96-SC-CX has observed that "litigation on interpretation of CENVAT Credit Rules has risen on account of various conflicting decisions given by the various Benches of CESTAT, the reason being that the Rules have not been properly drafted". The absence of provisions during the period from 1-3-2003 to 12-11-2007 in respect of quantum of Cenvat credit to be reversed if cenvated capital goods are cleared after use, as capital goods, [as a result of which if literal interpretation of rule 3(4) of Cenvat Credit Rules, 2002/rule 3(5) of Cenvat Credit Rules, 2004 is adopted, full Cenvat credit originally taken would be required to be reversed, even if the capital goods are cleared after long period of use at a small fraction of their original price, while during the period prior to 1-3-2003 and during the period from 13-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussed in para 6.1 above, for determining the abatement on account of period of use, the formula prescribed in old rule 57S(2)(b) of Central Excise Rules, 1944 as well as in 2nd proviso to rule 3(5) of Cenvat Credit Rules (introduced with effect from 13-11-2007) can be adopted. 7. In case of Cummins India Ltd. v. CCE, Pune-II reported in 2007 (219) ELT 911, capital goods received in 1996, in respect of which Cenvat Credit had been taken, were cleared after about 7 years' use in March, 2003 at much reduced value on payment of an amount equal to duty on the transaction value, instead of the Cenvat Credit originally taken, as demanded by the Department. The Tribunal in this case, set aside the demand for differential amount. The Tribunal's judgment, has been upheld by Hon'ble Bombay High Court vide judgment reported in 2009 (234) ELT.A-120." 11. Similarly, in L.G. Balakrishnan Bros.' case (supra), the Tribunal after taking note of the decision in Madura Coats (P.) Ltd. v. CCE 2005 (190) ELT 450 (Trib. - Bang.) held thus:— "3. I have carefully considered the facts of the case and the submissions made by the learned JDR. Rule 3(5) of CCR, 2004 prescribes that when inpu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rule 3(4) of Cenvat Credit Rules, 2001/2002 held that reversal of the credit is required only when the capital goods are removed from the factory "as such" and is not applicable to the removal of the used capital goods. Inasmuch as the law is settled on the issue, we set aside the impugned order and allow the appeal with consequential relief to the appellant. Stay petition also gets disposed of." 13. It is also to be noted that the decision in Cummins India Ltd.'s case (supra) was subjected to challenge before the Bombay High Court. However, the said challenge was dismissed observing thus:— "We find that the view taken by the Tribunal is in consonance with law". 14. Apparently the Bombay High Court has confirmed the consistent view taken by the Tribunal in various judgments while dismissing the challenge to the order in Cummins India Ltd.'s case (supra). 15. It is true that the Larger Bench while dealing with the scope and ambit of the expression "as such" has observed that the said expression has to be interpreted as commonly understood, which is in the "original form" and "without any addition, alteration or modification" and that the said expression has no connec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the impugned order cannot be sustained and is liable to be set aside while confirming that the duty liability in relation to the goods removed by the appellants was correctly assessed by the appellents and was paid appropriately. 17. It is also to be noted that as has been already pointed out in Geeta Inds. (P.) Ltd.'s case (supra), it was for a limited period that the relevant provision was found missing in the rule. The deficiency in that regard is already sought to be made good by necessary amendment to the rules by adding proviso to the said rule 3(5) which reads thus:— "Provided also that any duty mentioned in sub-rule (1), other than if the capital goods on which the capital goods are taken or removed after being manufactured or provider of duty to be service shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5 per cent for each quarter of the year or part thereof from the date of taking Cenvat credit." 18. Undisputedly, the amount of duty paid is in consonance with the provisions of law comprised under the above quoted proviso. 19. The appeal accordingly stands, disposed of in the above terms. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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