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2023 (7) TMI 632 - HC - Central ExciseReversal of credit at the time of transfer of capital goods - Determination of Depreciated value for reversal of Credit - application of law for availing the depreciation Under Section 32 of the Income Tax Act incorporated in Rule 4(4) of Cenvat Credit Rules read with Rule 3(4) of Cenvat Credit Rules, in respect of removal of used capital goods as such, during the year 2002-2003 - straight line method of depreciation effective from 13-11-2007 read with amended Rule from 27-2-2010 by Notification No.6/2010-CE(N.T) - rejection of application of Section 32 of the Income Tax Act, 1961, for depreciation used capital goods - placing the Circulars No.643/34/2002 dated 1-7-2002 read with Circular No.495/16/1993-Cus. dated 26-5-1993 without applying Section 32 of the Income Tax Act, 1961 - violation of principles of natural justice. HELD THAT:- This Court in the case of Rohini Mills Limited [2010 (10) TMI 424 - MADRAS HIGH COURT] considered the import of the phrase ‘as such’ and rejected the argument of the revenue that the reversal of credit much be total. On a conjoint reading of Rule 3(4) of the 2002 CCR, the 2002 Circular and 1993 Board Letter, the Bench concluded that the assessee was entitled to the benefit of depreciation in arriving at the assessable value of the goods - This decision has also been followed by a larger Bench of the CESTAT in the case of Navodhaya Plastic Industries Ltd [2013 (12) TMI 82 - CESTAT CHENNAI]. The Bench has, therein, noted the practice of bringing in capital goods for use for a short period and removal to another unit without reversal of CENVAT Credit availed, finding it to be an abuse of the scheme of CENVAT credit. The purpose of the scheme must thus be understood to provide a balance between the grant of credit and checking of abuse in the availment of the same. The appellant cannot be agreed upon that the above Rule would be applicable in the present case. Rule 4 sets out the preconditions for availment of credit. One of those conditions is that no credit shall be allowed in respect of that part of the value of capital goods that represents duty amount which the manufacturer claims as depreciation under the Income tax Act 1961 - This, by no means, can be understood to relate to Rule 3(4) of the methodology of valuation required thereunder. The reference to depreciation under the Income Tax Act in Rule 4(4) is in an entirely different context and has no application as urged by the Appellant. This condition has to be seen solely in the context of availment of CENVAT credit only and has no bearing on the valuation of the goods. The provision has always been at a flat rate and there has been no option extended to the assessee in regard to the manner by which the depreciation may be computed. In light of this conclusion, the judgement of the Constitution Bench in Commissioner of Central Excise, Bolpur vs. M/s. Ratan Melting and Wire Industries [2008 (10) TMI 5 - SUPREME COURT] is of no relevance. The substantial questions are answered in favour of the revenue and this appeal is dismissed.
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