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2022 (3) TMI 102 - HC - Central ExciseCENVAT Credit - removal of relevant goods from its manufacturing unit - Rule 3(5) of the then CENVAT Credit Rules, 2004 - HELD THAT:- What is of paramount importance is that it is possible for the capital goods, on which CENVAT credit has been taken, to be removed after one day of use in the manufacturing process or after years of use altogether. Indeed, Rule 5A of the said Rules, introduced in the year 2005, throws some light on this aspect as the capital goods which are rendered waste or scrap attract only a payment by the manufacturer or an amount equal to the duty leviable on the transaction value. In the instant case, there is no doubt that the capital goods were used for some time and the assessee no longer desired to use such goods and, accordingly, sought permission to remove the same; whereupon, pursuant to the department’s advice by the department’s reply of October 12, 2006, the assessee paid the amount of CENVAT credit availed for acquiring the Arc furnace in cash since it had no CENVAT credit in its balance. According to the assessee, Rule 3(5) of the said Rules of 2004 came to be amended in November, 2007 by the incorporation of a proviso which, in effect, provided that the amount of CENVAT credit availed of at the time of acquisition of any capital goods for the use thereof by the manufacturer for producing any excisable products would have to be refunded, but the quantum of refund would stand reduced to 2.5 percent for every quarter that the capital goods had been used by the manufacturer - if a clever manufacturer wanted to hoodwink the department by obtaining the capital goods on CENVAT credit and after a short use thereof wanted to dispose of the same, he would have to refund a larger part of the CENVAT credit he availed of. According to the assessee, the Tribunals all over the country have always applied the proviso to Rule 3(5) with retrospective effect as the omission of the proviso would operate harshly on a manufacturer who wanted to replace the capital goods several years after its acquisition - This is the only area that requires attention. In the event the department is willing to give the present assessee the benefit under the proviso on the basis of the practice that may have evolved or by giving the proviso retrospective effect, the matter may end there. List on March 3, 2022.
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