2010 (4) TMI 434 - AT - Central Excise

Cenvat Credit- Stay- The demand was confirmed on account of removal of the capital goods in violation of Rule 57-S(1)(ii) of the said Rules. The sole contention of the respondent is that there was no physical removal of the goods as such and the rule clearly requires physical removal of the goods. According to the respondent the mere leasing out of the capital goods even along with the manufacturing facility in the factory would not amount to physical removal of the goods within the meaning of the said expression under the said rule. Held that- stay has been granted. if the stay is not granted the appellants are bound to suffer irreparable loss and therefore in our considered opinion the application deserves to be allowed and impugned order is stayed till the disposal of the appeal.

Summary

Issues Involved:
Appeal against order confirming demand under Rule 57U of Central Excise Rules, 1944 for removal of capital goods in violation of Rule 57-S(1)(ii).

Analysis:
1. Issue of Setting Aside Order by Commissioner (Appeals):
The appeal arose from the Commissioner (Appeals) setting aside the order confirming the demand under Rule 57U of the Central Excise Rules, 1944. The Addl. Commissioner had confirmed the demand of Rs. 7,59,728/- under Rule 57U read with Section 11A of the Central Excise Act, 1944. The Commissioner (Appeals) set aside this order, leading to the appeal.

2. Interpretation of Rule 57-S(1)(ii) - Physical Removal Requirement:
The crux of the matter revolved around the interpretation of Rule 57-S(1)(ii) of the Central Excise Rules, 1944. The appellant contended that there was no physical removal of the capital goods as they were leased out, not physically removed. The rule requires actual and physical removal of goods, and the mere leasing out of goods should not amount to a violation of the rule.

3. Meaning of "Removed" in Rule 57S(1)(ii):
The Tribunal analyzed the meaning of the term "removed" in Rule 57S(1)(ii) to determine if leasing out capital goods constituted removal. The Tribunal emphasized that the term implies divesting control over goods, allowing third-party utilization. Interpreting "removed" as physical removal would defeat the purpose of the provision, emphasizing the importance of context in legal interpretation.

4. Precedents and Legal Interpretation:
The Tribunal referenced various judgments, including the Karnataka High Court and Tribunal decisions, to support their interpretation. The Karnataka High Court held that transactions involving leasing out goods could amount to removal under the Act. The Tribunal in Majestic Auto Ltd. also emphasized the obligation to pay duty on capital goods removed from factory premises, even if leased out.

5. Grant of Stay:
Considering the legal provisions, precedents, and facts of the case, the Tribunal found a prima facie case for granting a stay on the impugned order. Failure to grant a stay would cause irreparable loss to the appellants. Thus, the Tribunal granted a stay on the order until the appeal's disposal, ensuring the appellants did not suffer undue harm during the legal process.

This detailed analysis of the judgment highlights the key issues, legal interpretations, precedents, and the Tribunal's decision regarding the appeal against the order confirming demand under Rule 57U of the Central Excise Rules, 1944 for the alleged violation of Rule 57-S(1)(ii).