Excise Appeal No. 10329 of 2013-SM
(Arising out of OIA-SRP-115-VAPI-2012-13 dated 01/11/2012 passed by Commissioner of Central Excise-VAPI)
Unique Health Care Products
VERSUS
C.C.E. & S.T.-Vapi
APPEARANCE
Shri. S. J. Vyas, Advocate appeared for the Appellant Shri. P Ganesan, Superintendent (AR) for the Respondent
CORAM: HON’BLE MEMBER (TECHNICAL), MR. RAJU
Raju
Final Order No. A/ 10374 /2023
DATE OF HEARING: 22.02.2023 DATE OF DECISION: 22.02.2023
This appeal has been filed by Ms/ Unique Health Care Products against demand of reversal Cenvat Credit on removal of capital goods.
- Learned Counsel argued that the provision of Rule 3(5) of the Cenvat Credit Rules, 2004 would not be applicable to the appellant’s case as the goods has been used before the same work removed. He also pointed out that proviso of Rule 3 (5A) would also not be applicable to the appellant’s case asthe goods has not been removed as waste and scrap. He pointed out that in the case of COMMISSIONER OF EX.,K SALEM Vs. ROGINI MILLS
LTD.-2010 (10) TMI 424 – Hon’ble Madras High Court has granted relief in identical circumstances by accepting the reversal of Cenvat Credit on the transaction value of the capital goods cleared. He also relied upon the decision of Tribunal in the case of COMMISSIONER OF C.EX., CHANDIGRAH Vs. RAGHAV ALLOYS (P) LTD-2009 (4) TMI 184 –CESTAT, NEW DELHI
wherein the similar relief has been granted.
- LearnedAR relies on the impugned
- I have considered the rival submissions. I find that it is not in dispute thatthe capital goods on which the credit was availed, has been removed
after some use. It is notice that Rule 3(5) and Rule 3(5A) Cenvat Credit Rules, 2004 deal with the obligation of a personal availing credit when that person removes the capital goods on which the credit has been availed. The said Rules are reproduced below:-
Rule-3(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.
Rule-3 (5A) if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.
It is notice that after the disputed period Rule 3(5) was amended by insertion of proviso reads as under.:
“Provided also that if the capital goods, on which CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output services 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 a year or part thereof from the date of taking the Cenvat Credit.”
- From the above sequence of events, it apparentthat there was no Rule for reversal of Cenvat Credit on capital goods cleared after some use.
- I find that similar case has been examined by Tribunal in the case of RAGHAV ALLOYS (P) LTDwherein the following has been observed:-
“4.During the period prior to 1-3-03, Rule 3(4) provided that where inputs or capital goods, in respect of which Cenvat credit has been taken, are cleared as such, the manufacturer will be required to pay an amount equal to the duty at the rate prevailing on the date of clearance and on value determined under the provisions of Section 4 of the Central Excise Act and in case of removal of used capital goods, as per the Board‟s circular No. 643/34/02-CX., dated 1-7-02, depreciation as per the rates fixed in the Board‟s letter No. 495/16/93- Cus.VI dated 26-5-93 was to be allowed. They took care of the situation like the one in this case where cenvated capital goods, after some use are cleared, as the Cenvat credit required to be reversed was the duty payable on the depreciated value. With effect from 13- 11-07 a proviso was added to Rule 3(5) of Cenvat Credit Rules, 2004 [corresponding to Rule 3(4) of Cenvat Credit Rules, 2002] providing that if the capital goods, on which Cenvat credit has been taken, are removed after being used, the manufacturer shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5% for each quarter of a year or part thereof from the date of taking the Cenvat credit – thus if the Cenvated capital goods are cleared after five years of use, the credit to be reversed will be 50% of the credit
originally taken. The question now arises as to whether during the period from 1-3-03 to 12-11-07 when the Rule 3(4) of Cenvat Credit Rules, 2002/Rule 3(5) of Cenvat Credit Rules, 2004 provided for payment of an amount equal to the Cenvat credit taken when Cenvated inputs or capital goods are removed 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 some time. Unlike inputs, which get consumed hundred percent 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 retained their identity as capital goods, it would be logical to insist on reversal of Cenvat credit depending upon the extent of use, which would be more or less the duty chargeable on the depreciated value of the used capital goods. If the Department‟s view is accepted, it would lead to absurd results as even when the cenvated capital goods are cleared after long years of use at a small practice of their original value, still full Cenvat credit originally taken would be required to be reversed which would defeat the very purpose of grant of Cenvat credit facility in respect of capital goods. Tribunal in case of CCE, Ludhiana v. Nahar Fibres reported in 2007 (220) E.L.T. 855, while holding that the expression “as such” occurring in Rule 3(4), 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 even at the time of their removal, has upheld the charging of an amount equal to duty on the depreciated value of used capital goods under Rule 3(4) at the time of their clearance. In case of Cummins India Ltd. v. CCE (supra), it was held by the Tribunal that the capital goods received in 1996 and removed after 7 to 8 year‟s use in Jan „02 cannot be said to be the capital goods removed as such, and at the time of their clearance, the credit originally taken is not required to be reversed and payment of an amount equal to the duty on the sale price of such used capital goods would meet the requirement of the law. This judgment has been upheld by Hon‟ble Bombay High Court vide judgment reported in 2009
(234) E.L.T. A120.
5.As regards the judgment of Larger Bench of Tribunal in case of Modernova Plastyles Pvt. Ltd. v. CCE, Raigad (supra), as observed by the Tribunal in para 3 of the judgment, the case of M/s. Cummins India Ltd. has been distinguished from this case.”
Hon’ble High Court in the case of ROGINI MILLS LTD has also been examined similar issue and came to the following conclusion:-
“2. The brief facts, which are required to be stated, are that the first respondent is the manufacturer of cotton yarn, which avails cenvat credit facilities. They sold their Cenvat availed capital goods on payment of duty by adopting the transaction value at the time of subsequent sale instead of the value for which the Cenvat credit was originally taken on the inputs or capital goods.
A show cause notice dated 30-12-2004 was issued determining the differential duty. The lower adjudicating authority confirmed the differential duty of Rs. 1,11,912/- with appropriate interest and also imposed penalty of equal amount.
- As far as the order of the Larger Bench of the Tribunal reportedin 2008 (232) L.T. 29 is concerned, we find that though a reference has been made to the addition of the proviso to Rule 3(5) with effect from 13-11-2007, the relevancy of the said addition providing for making an assessment in a depreciated manner i.e. reducing the Cenvat credit at the rate of 2.5% for each quarter of a year from the date of taking Cenvat credit has not been examined. In the circumstances, the order of the Tribunal impugned in this appeal cannot be found fault with.
- We, therefore, do not find any scope to entertain this appeal, inasmuch as the questions of law sought to be raised at the instance of the appellant have already been correctly answered by the Tribunal itself and therefore, we do not find any need or necessity to entertain the said questions of law once over again. The order of the Tribunal in remanding back to the original authority for re-determination of the amount after allowing depreciationto the extent allowed in the case law cited in its order is sustained. The appeal fails and the same is dismissed. Consequently, M.P. No. 1 of 2010 is also dismissed”.
- It is noticed that in the instance case the appellant has reverse the Cenvat Credit equivalent to the duty on the transaction valueof the capital goods cleared. Since, such reversal has been accepted by the Tribunal and the Hon’ble High Court in the aforementioned orders, the reversal sought by the revenue at a different rate cannot be accepted. Therefore, the appeal is
(Dictated & Pronounced in the open court )
RAJU MEMBER (TECHNICAL)
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