Case Law Details
Removal of Capital Goods ‘after being put to use’ does not amount to removal of Capital Goods ‘as such’
Pushpak Steels Pvt. Ltd. (the Appellant) was manufacturer of goods falling under Chapter 72 of the Central Excise Tariff Act, 1985. The Appellant purchased an Electric Motor (impugned Capital Goods) from Crompton Greeves Ltd.under an invoice No. 357 dated January 9, 2003 on payment of Excise duty amounting to Rs. 1,32,280/-. The Appellant availed 50% of the Cenvat credit on January 10, 2003 vide RG-23C Pt-II Entry No. 78 and the balance 50% Cenvat credit was availed on April 1, 2003 vide RG-23C Pt-II Entry No. 48. The said Cenvat credit was subsequently utilized for the payment of duty on Finished Goods.
Later, the Appellant cleared the impugned Capital Goods after being put to use on payment of Excise duty of Rs. 86,400/- on the transaction value, instead of reversing the Cenvat credit availed i.e. Rs. 1,32,280/- on the Capital Goods. However, on being pointed out by the Department, the Appellant paid the differential duty of Rs. 46,880/- on July 23, 2007, but refused to pay the interest dues.
Resultantly a Show Cause Notice dated April 2, 2009 was issued to the Appellant for the short levy amounting to Rs. 46,880/- along with interest and penalty. Further, the amount paid by the Appellant was ordered for adjustment. Thereafter, the Adjudicating Authority confirmed the demand vide Order-in-Original dated March 25, 2010. Being aggrieved, the Appellant preferred an appeal before the Ld. Commissioner (Appeals)submitting as under:
- Rule 3(5) of the Cenvat Credit Rules, 2004 (the Credit Rules) was amended to remove the difficulty being faced in clearance of Capital Goods after a period of use, as it is different from ‘removal as such’. Accordingly, the third proviso to Rule 3(5) of the Credit Rules was inserted w.e.f. November 13, 2007 providing that in case of removal of Capital Goods after being used, Cenvat credit payable needs to be reduced at 2.5% for each quarter or part thereof from the date of taking Cenvat credit;
- The Appellant had not removedimpugned Capital Goods ‘as such’, but after use, hence the provisions of Rule 3(5) of the Credit Rules as it stood on the date of removal i.e. on November 4, 2005 was not applicable and the Appellant have rightly paid duty on transaction value.
The Ld. Commissioner (Appeals) rejected the submissions made by the Appellant on the ground that amendment in Rule 3(5) of the Credit Rules w.e.f. November 13, 2007 is prospective in nature. Being aggrieved, the Appellant preferred an appealbefore the Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai relied upon the judgment in the following case laws:
- Commissioner of Central Excise Vs. Raghav Alloys Ltd. [2010-TIOL-881-HC-P&H-CX];
- Cummins India Ltd. Vs. Commissioner of Central Excise, [2009 (234) ELT A 120 Bombay High Court]
wherein it was held that removal of Capital Goods after being put to use was not ‘removal as such’ and duty paid on transaction value at the time of removal of such Capital Goods, prior to November 13, 2007, is correct.Thus, the matter was decided in favour of the Appellant.
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