TMI Blog2022 (7) TMI 653X X X X Extracts X X X X X X X X Extracts X X X X ..... the capital goods when the MODVAT Credit scheme was introduced, it was provided that person claiming the credit in respect of the Capital Goods was required to intimate about the receipt of Capital Goods and installation of the same to jurisdictional officers. Hence all the information in respect of the Capital Goods against which the MODVAT/ CENVAT Credit has been taken will be available with the revenue authorities. Noting the fact that the capital goods were removed by the appellant after having been put to use for considerable period of time, the approach adopted by the appellant to reverse the amount determined on the basis of book value of the capital goods, or depreciated value of capital goods cannot be faulted with. Revenue has not produced a single instance by referring to the credit account of the appellants to establish that these capital goods are the one against which they have actually taken the credit, and these goods have been cleared as such. On the contrary they have hypothetically calculated the amount of the credit to be reversed by denying the depreciation as claimed by the appellant while clearing these capital goods to their Mandideep unit. The fact of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trinity Auto Components Ltd. [2010 (257) E.L.T. 548 (Tri. Mumbai) Greenply Industries [2010 (259) E.L.T. 103 (Tri. - Del.) 3.3 Arguing for the revenue learned authorized representative while reiterating the findings recorded in the impugned order submitted that, in terms of provisions of Rule 3 (5) of the CENVAT Credit Rules, 2004 as it existed then appellants should have cleared these capital goods after reversal of the credit determined on purchased value of the goods removed. Revenue has through various communications dated 27.08.2007, 29.08.2007, 14.02.05 and 24.03.2008 asked the appellants to submit the original purchase invoices to establish their claim that these capital goods were procured by them prior to coming of the CENVAT/ MODVAT credit scheme into existence. However appellants have failed to provide the said invoices The fact that appellants themselves cleared these goods on payment of the duty/ reversing the credit on the depreciated value establishes that these goods were received subsequent to the credit scheme coming into force. In some case appellant have cleared the goods on 0% depreciation also. 4.1 We have considered the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts in the submissions made by the assessee that these capital goods are old and belong to the era when no Modvat/Cenvat credit could have been possibly availed by them. No positive evidence was submitted to support their claim. 17. The provisions of rule 3 (5) of the CCR, 2004 which apply to the material period are clear in this regard. It reads,- (4) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final products 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 7. (Emphasis underlining supplied) 17.1 The issue is no longer res integra. I am guided in this regard by the Larger Bench decision of the Hon'ble CESTAT in the case of M/s Modernova Plastyles Pvt. Ltd. 2008(232)ELT 29 (Tri-LB) and wherein while distinguishing the Hon'ble Bombay High Court decision in Cummins India, it has been held thus - 2. The expression as such has to be interpreted as commonly understood, which is in the original form and without any addition, alteration or modific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2007, only deals with the provisions of Rule 3(4)(C) and does not consider the provisions of Rule 4(5)(a) and, therefore, cannot be said to cover the present issue. 4. ... 5. In the light of the above, we answer the question referred to us by holding that reversal of credit availed on capital goods is required when capital goods are removed, whether used or not. 17.2 The Larger Bench decision has been followed in the following cases a. Harsh International Pvt Ltd. vs CCE Delhi II 2011 (269) ELT 225 (Tri-Del)] Penalty - Cenvat/Modvat - Capital goods - Reversal of credit on removal of capital goods from factory - As per Rule 3 of Cenvat Credit Rules, 2002, at the relevant time, when capital goods were removed as such from factory, assessee required to pay an amount equal to the credit availed by them in respect of such capital goods - Plea that, removal of goods was not with any intention of avoiding revenue liability, needs to be proved by assessee - Mere contention that on account of frequent changes in provision of law, assessee failed to discharge revenue liability is devoid of any substance - Assessee having failed to discharge revenue liability, by r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of revenue neutrality for non demanding of the duty is not envisaged under the provisions of Section 11A or for that matter under rule 14 of CCR, 2004. Also the concept of revenue neutrality is alien to statutory authority like me. I have to decide the case on the basis of the Central Excise law and the Rules made there under. 20.1 I rely on the following case laws in this regard ++ Mahindra Mahindra 2005(179)ELT 21(SC) ++ Dharampal Satyapal 2005(183)ELT 241(SC) ++ Dharampal Premchand Ltd. 2011(265)ELT 81(Tri-Del) ++ Baba Asia Ltd. 2011 (267) ELT 115 (Tri-Del) 21. Further, I hold that equitable consideration have no place in tax law also there is no intentment in interpretation of law. It has to be interpreted as written i.e. literal meaning of the law to be taken into consideration nothing to be read into it or implied as held in the following decisions of Hon'ble Supreme Carl High Court. ++ Jessop Company Ltd. 2010(250)ELT 490(Cal) Interpretation of tax statutes - Intentment - Court to examine what is stipulated as far as interpretation of revenue law is concerned - Nothing can be read into a provision and application by i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he time of setting up of the factory and starting of operations, the Appellants had purchased after payment of excise duty several capital goods at their factory such as, capacitor banks, C.I. bed plates, looping machines and accessories, power analysers, transformers with OLTC, tape winding and tensioning machines, measuring instruments, cables, lathe machines, TOS cylindrical grinding machines, etc. All the said capital goods were used by the Appellants in the manufacture of their finished products, viz. large machines. the said capital goods were installed by the Appellants at their said factory for the purpose of manufacture of the said large machines. when the said capital goods were purchased by the Appellants after payment of excise duty, there existed no Rules under which a manufacturer could avail the credit of any excise duty on any capital goods purchased by it. 2 1976 onwards till 2005-06 the said capital goods were put to use by the Appellants in the manufacture of the said large machines. 3 1976 onwards till 2005-06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce referred in the show cause notice, viz. the Appellant's letter dated 08.09.2006 referred in para 2 of the show cause notice. From Ex A pg. 18 to Ex E pg.23 9 08.08.2006 to Nov, 2010 correspondence ensued between the Department and the Appellant on the to issue 10 12.22.2010 Show cause notice issued to the Appellant inter alia contending that the Appellants should have reversed/paid excise duty on the capital goods removed by them from their Kanjur factory on the basis of the original cost/value of the capital goods and on that basis a demand was raised on the Appellants for differential duty of Rs. 86,55,477/- with interest and penalty thereupon. Ex. F Pg. 28 11 12.01.2011 Appellant replied to the Show cause notice. Ex. G Pg. 39 12 30.11.2011 Impugned order passed by the Respondent confirming the demand raised in the show cause notice. 4.4 From the above time line a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of their written value. No evidence or even the averment has been made in the show cause notice or the impugned order that these capital goods are the one against which the appellant had taken MODVAT/ CENVAT Credit and have been cleared by them as such without being put into use. In the view of this we are not in agreement with the findings recorded by the adjudicating authority in this regard. 4.5 Issue in dispute vis a vis the value which should be taken for determination of the amount to be reversed under Rule 3 (5) of the CENVAT Credit Rules, 2004 has been decided by various authorities. Appellant have in their submissions made relied upon the following decisions which hold as follows: a. In case of Moser Baer tribunal held as follows: 4. After hearing from both sides and on perusal of record, it appears that the appellant availed the credit on capital goods prior to 1-4-01 and used in the manufacture of finished goods during the relevant period. Thereafter they removed the capital goods to their new unit for use in the manufacture of finished goods as their old unit is closed down. Thus it is a case of transfer of capital goods inter-unit. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital goods. Both the authorities below have held that since the capital goods have been cleared by the appellant, they are required to reverse the original quantum of credit availed by them in terms of provisions of Rule 3(4) of Cenvat Credit Rules, 2002. 3. After hearing both the sides I find that the said rules require reversal of credit in respect of the capital goods which are removed as such . The plain and simple meaning of the expression as such would be that the capital goods are removed without putting them to use. Admittedly, in the present case capital goods stand used for a period of more than 7 to 8 years. As such, the interpretation given by the authorities below would lead to absurd results if an assessee is required to reverse the credit originally availed by them at the time of receipt of the capital goods, when the said capital goods are subsequently removed as old, damaged and unserviceable capital goods. This would defeat the very purpose of grant of facility of Modvat credit in respect of capital goods and would not be in accordance with the legislative intent. The same view was held by the Tribunal in the case of Madura Coats P. Ltd. v. CCE, Tirunel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 1-7-2002 along with Board s letter dated 26-5-1993, it is quite clear that the inputs or capital goods when disposed of after putting it into some use over a period of time, then the assessee would be entitled to reverse whatever Cenvat Credit availed on the value to be assessed on the date of such subsequent sale as capital goods. Such a conclusion by relying upon the above referred to Board s Circular and the letter as well as the addition of proviso to Rule 3(5) with effect from 13-11- 2007, is the manner in which the expression as such used in Rule 3(4) can be interpreted. Consequently, the interpretation put in the order of the Principal Bench reported in 2009 (242) E.L.T. 124 merits acceptance. The order of the Tribunal impugned in this appeal applying the said ratio of the Principal Bench is, therefore, perfectly justified. d. In the case of Rajalakshmi Paper Mills Pvt Ltd, CESTAT Chennai bench held as follows: 2. I have considered the case records and the submissions made by both sides. It is seen that the Commissioner (Appeals) passed the impugned order relying on a decision of the Bangalore Bench of the Tribunal in the case of Madura Coats Ltd. [2005 (1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can taken the CENVAT credit again when the inputs or capital goods are received back in his factory . 16. Plain reading of the said rule would disclose that it relates to the situation whereby the capital goods are removed either in the original form or after being partially processed to be sent to the job worker for further processing, testing, repair, reconditioning or for any other purpose. In comparison, the Rule 3(5) refers to the situation which may arise not necessarily in relation to any processing or acting upon the capital goods for any purpose but even for the purpose of discarding the capital goods. Being so, the expression as such in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been observed as under :- 8. We have heard arguments of both the Ld. Counsel. The Tribunal has rightly noted that unlike inputs, which get consumed 100% with the same are taken up for use in relation to manufacture of finished goods, capital goods are used 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 has become in-serviceable and fit to be scrapped. The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, 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. The machines which are cleared after utilization cannot be treated as machines cleared as such. With effect from 13-11-2007, a proviso has been added to Rule 3(5) of the Cenvat Credit Rules providing that if the capital goods on which Cenvat credit has been taken are removed after being used, the manufacturer shall pay the amount equa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Harsh International (Khaini) Pvt. Ltd. 4.7 Larger Bench of Tribunal has in case of Navodhaya Plastics [2013 (298) E.L.T. 541 (Tri. LB)], held as follows: 10 . The use of capital goods is to spread over many years. A decision to the effect that assessees can bring in capital goods, use it for a few days and then remove it without reversal of any Cenvat credit taken is not consistent with the overall scheme of Cenvat credit and can lead to abuse of the scheme. Considering this aspect and the legislative history and the Circular of C.B.E. C., we are of the view that we should respectfully follow the decision of the Hon ble Madras High Court in the case of Commissioner of Central Excise, Salem v. Rogini Mills Ltd. (supra) and the reference made to this Larger Bench is answered accordingly . 4.8 In view of the decisions as above and noting the fact that the capital goods were removed by the appellant after having been put to use for considerable period of time, the approach adopted by the appellant to reverse the amount determined on the basis of book value of the capital goods, or depreciated value of capital goods cannot be faulted with. 4.9 it is settled princi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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