Crompton Greaves Ltd. Vs Commissioner of Central Excise (CESTAT Mumbai)
Held that the machines which are cleared after utilization cannot be treated as machines cleared as such. Accordingly, duty equal to cenvat credit not payable as prescribed under rule 3(5) of CCR, 2004
Facts-
The department alleged that the appellant suppressed the in asmuch as they had not shown the original purchase price value of the capital goods cleared during the period from November 2005 to October 2006 in their relevant clearance invoices and ER-1 returns but had cleared the capital goods on a depreciated value without any basis as provided in law for such depreciation, and by contravening the provision of rule 3(5) of the CCR, 2004, a differential Central Excise duty demand of Rs.86,55,477/- was issued on 29.05.2008 for recovery in terms of Rule 14 of CCR, 2004 r/w proviso to section 11A(1) of the CEA, 1944. Interest u/r 14 of CCR, 2004 r/w s. 11AB of the CEA, 1944 is also sought to be recovered along with penalty u/r 15 of CCR, 2004 r/w 11AC of the CEA, 1944.
The show cause notice was adjudicated as per the impugned order. Aggrieved by the order appellants have filed this appeal.
Conclusion-
It has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. However, the machines which are cleared after utilization cannot be treated as machines cleared as such.
Held that the capital goods were removed by the appellant after having been put to use for a considerable period of time, the approach adopted by the appellant to reverse the amount determined on the basis of the book value of the capital goods, or depreciated value of capital goods cannot be faulted with.
FULL TEXT OF THE CESTAT MUMBAI ORDER
This appeal is directed against order in original No 22/COMMR/M-III/PKA2011-12 dated 30.11.2011 of the Commissioner of Central excise Mumbai III. By the impugned order following has been held:-
“Order
A. I determine and demand Rs.86,55,477/- (Rupees Eighty six lakhs fifty five thousand four hundred seventy seven only) in terms of rule 14 of the Cenvat Credit Rules, 2004 read with the then section 11A(2) of the Central Excise Act, 1944 raised in the show-cause notice dated 12.11.2010 against M/s Crompton Greaves Ltd (Large Machine Division) in terms of the provisions rule 14 of the CCR, 2004 read with the provisions of the then section 11A of the CEA, 1944] and order recovery thereof.
B. The assessee is also ordered to pay interest in terms of Rule 14 of the CESVAT Credit Rules, 2004 read with the then section 11AB of the CEA, 1944.
C. I also impose penalty of Rs. 86,55,477/- (Rupees Eighty six lakhs fifty five thousand four hundred seventy seven only) on the assessee M/s Crompton Greaves Ltd. (Large Machine Division) in terms of rule 15 of the CCR, 2004 read with the then section 11AC of the CEA, 1944. I also give the assessee the option of payment of 25% of the penalty as available under the then section 11AC if they pay the duty confirmed within thirty days of the receipt of this order along with the interest u/s 11AB of the CEA, 1944. Needless to mention the reduced penalty of 25% also needs to be paid within the period of thirty days as mentioned in the then in the then section 11AC of the CEA, 1944.
D. The assessee M/s Crompton Greaves Ltd. (Large Machine Division) is directed to pay the adjudged amounts forthwith.”
2.1. Appellant is registered manufacturer of Electric Motors and Generators and parts thereof falling under Chapter 85 of the CETA, 1985 and availing Cenvat Credit facility.
2.2 During the scrutiny of ER-1 returns for the period November 2005 to October 2006 it was observed that appellants cleared capital goods from their factory to their M-7 Division at Mandideep (M.P) and to other customers. Range Superintendent had under his letter dated 08.08.2006 asked the assessee to intimate the practice following for arriving at the assessable value of the capital goods cleared. The assessee on 8.09.2006 informed that the method followed by them for arriving at the assessable value of Capital goods cleared is original cost less 70% depreciation i.e. 30% of original cost on which duty had been paid. The Range Superintendent had thereafter vide his letter dated 11.09.2006 asked the said assessee to intimate the system of depreciation adopted by them and to furnish the statement showing the original value of each machinery and value arrived at by them for payment of duty and to furnish original purchase invoices of the capital goods. The appellant vide letter dated 10.10.2006 informed that the system of depreciation adopted by them on capital goods is WDV and that they have not taken CENVAT credit on capital goods as they were purchased by them prior to 1994 and it is very difficult to locate the purchase invoices of these capital goods. However, they informed that they will furnish the statement showing the original value of each machinery as per their Books of Accounts and the value arrived at by them for payment of duty on these capital goods. Vide a further letter dated 27.08.2007 the Range Superintendent also asked the assessee to furnish the documentary evidence in support of their contention that the capital goods in question cleared by them were very old and that no Modvat/Cenvat credit was availed by them on the said capital goods, otherwise to pay an amount as per the provision of rule 3(5) of the CCR, 2004. On 27.06.2007, the appellant furnished statement showing capital goods cleared for the period from January -2006 to October 2007 along with photocopies of clearance invoices for the said period. In the said statement, the assessee has mentioned original cost of capital goods, various percentages of depreciation claimed from original cost such as 70%, 64%, 44%, 50% etc. and the assessable value so arrived at and the duty paid thereon
2.3 After correspondences made, appellant vide their letter dated 19.12.2007 furnished revised statement but did not furnish the documentary evidence on the basis of which they have shown the original cost/value of the capital goods cleared and also did not furnish the purchase invoices in respect of the said capital goods; also did not clarify as to which provisions of the CEA, 1944 and the Rules framed thereunder they had arrived at the Assessable value and discharged duty.
2.4 Thereafter, vide their letter dated 26.05.2008 appellant furnished statement showing the original cost of machineries/capital goods cleared, as available in their SAP system.
2.5 Since the appellant did not furnished any documentary evidence in support of their contention that they have not availed any Cenvat/Modvat credit on these capital goods, revenue was of the view that appellant have to pay an amount equal to the credit availed in respect of such capital goods and which would be equivalent to the duty payable on the basis of original cost/value of the capital goods in question as shown in the purchase invoices. Based on the statement furnished by the appellant vide their letter dated 26.05.2008, the differential amount of Central Excise duty of Rs.86,55,477/- was worked out.
2.6 Alleging that the appellant suppressed the aforesaid facts from the department inasmuch as they had not shown the original purchase price value of the capital goods cleared during the period from November 2005 to October 2006 in their relevant clearance invoices and ER-1 returns but had cleared the capital goods on a depreciated value without any basis as provided in law for such depreciation, and by contravening the provision of rule 3(5) of the CCR, 2004, a differential Central Excise duty demand of Rs.86,55,477/- was issued on 29.05.2008 for recovery in terms of Rule 14 of CCR, 2004 r/w proviso to section 11A(1) of the CEA, 1944. Interest u/r 14 of CCR, 2004 r/w s. 11AB of the CEA, 1944 is also sought to : be recovered along with penalty u/r 15 of CCR, 2004 r/w 11AC of the CEA, 1944.
2.7 The show cause notice was adjudicated as per the impugned order. Aggrieved by the order appellants have filed this appeal.
3.1 We have heard Shri Aditya Chitale, Advocate for the appellant and Ms Anuradha Parab, Assistant Commissioner, Authorized Representative for the revenue.
3.2 Arguing for the appellant learned Counsel submits:
> The Appellant had removed the capital goods from their Kanjur factory after payment of excise duty at their depreciated/written down values was known to the Department. These clearances were duly reflected in the monthly returns filed by them. Thus there has been no suppression or wilful short payment or fraud or misstatement or contravention of law by them justifying invocation of extended period as per Section 11A while issuing the Show Cause Notice dated 12.11.2010.
> The capital goods which were removed by them in 20052006, were installed at their Kanjur factory in 1976 were “put to use” in the process of manufacture of the said large machines. As a result of being “put to use the said capital goods had depreciated in value over a period of time.
> These capital goods were purchased by them when their factory was set up and started functioning in 1976 and removed from the factory almost 30 years later in 20052006. They did not have in their custody the original purchase invoices evidencing the purchase of the said capital goods and payment of excise duty up on them
> The scheme of Modvat/ CENVAT credit did not exist in the statue when the Appellant purchased the said capital goods in 1976 after payment of excise duty. Thus there was no occasion for them to take Modvat/ CENVAT credit of the excise duty paid by them as the scheme of MODVAT Credit was introduced in respect of inputs only in 1986 and extended to Capital Goods in the year 1994.
> They had correctly cleared the said capital goods from their Kanjur factory after reversing/paying excise duty on the said capital goods at their depreciated/written down value.
> The matter is revenue neutral, as whatever duty that the Appellant may have paid/reversed on the said capital goods was very much available to them by way of Cenvat credit when the said capital goods entered their own factory at Mandideep, Madhya Pradesh.
> He relied on the following decisions in support of his contentions:
