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TMI Blog2012 (6) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... vat credit on the capital goods under the Cenvat Credit Rules, 2004. On 1st July, 2007, it informed the Central Excise Authorities that pursuant to the withdrawal of the licences issued by the licensor, it has stopped production and clearance of the goods and that the factory would remain closed for an indefinite period and all manufacturing activity would stand suspended from 30th June, 2007. By letter dated 18th July, 2007, the appellant also surrendered in original the registration certificate issued by the Central Excise Authorities stating that it was no longer required. In the months of June and July, 2007, it sold the capital goods such as "old used filter pouch packing machine", "old used HFFs machine PK 85", "old used dust collector", "old used packing and sealing machine", "old used air compressor", "old used grinder" and some other used machines to its sister concern, viz., Harsh International (Khaini) Pvt. Ltd., the other appellant herein, and did not pay any excise duty thereon, taking the position that under Rule 3(5) of the Cenvat Credit Rules, 2004 used capital goods, did not affect any duty nor was it required to reverse the cenvat credit which it availed of at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used capital goods which did not exhaust their useful life at the time of clearance. 2. The departmental understanding of the relevant rule was that even after use, the identity of the capital goods does not change, and, therefore, they remain "as such" and , therefore, their clearance will be treated as clearance of capital goods and the assessee would be liable to pay an amount equal to the credit availed in respect of such capital goods. The removal shall also be made under in invoice. 3. The capital goods have been removed without intimating the department. 4. The used capital goods were removed by the assessee in June and July 2007. It was only from 13.11.2007 that an amendment was made to the relevant rule which added a proviso to the effect that if the capital goods, of which cenvat credit has been taken, are removed after being used, the manufacturer will be liable to pay a reduced amount of the cenvat credit taken on the capital goods, such reduction being 2.5% for each quarter or a year or part thereof from the date of taking the cenvat credit. Therefore, prior to the said date it did not matter that the capital goods were removed after being put to use, because even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d constant in the sense that the obligation to pay the duty or to reverse the credit equivalent to what was availed of, related to the capital goods in the months of June and July, 2007. Thus capital goods had been used by Harsh International Pvt. Ltd., after they were purchased during the period 2003-05. In June and July, 2007 the capital goods were sold to Harsh International (Khani) Pvt. Ltd. The Rule, as it stood amended with effect from 6.5.2005, according to Tribunal, was clear in the sense that capital goods removed "as such" from the factory was liable to excise duty or to reverse the cenvat credit. It was only from 13.11.2007, when the proviso was added to the Rule, that used capital goods were subjected to a concessional rate of duty, that is, an amount equal to the cenvat credit taken in respect of the capital goods and reduced by 2.5% for which quarter of the year or part thereof from the date of taking the credit. In this view of the matter, the Tribunal observed as follows:- "10. Plain reading of above provisions of law discloses that at the relevant time, that is, when the capital goods were removed as such from the factory by the appellants, they were required to p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IN THE CASE OF M/S. HARSH INTERNATIONAL PVT. LTD. 11. In the case of Harsh International Pvt. Ltd., the first question is whether it is liable for the duty of Rs. 58,88,038/- under Section 11A of the Act. According to Rule 3(5), as it stood amended with effect from 6.5.2005, the following was the position:- "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" (underlining ours) 12. On 13.11.2007 a proviso was added to Rule 3(5) and the same is as follows:- "Provided further 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 the percentage points calculated by straight line method as specified below for each quarter of a year or part th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleard 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 equal to Cenvat Credit taken on the said capital goods reduced by 2.5% for each quarter of year or part thereof from the date of taking the Cenvat Credit. The board has also in the Circular dated 1.7.2002 clarified that in the case of clearance of goods after being put into use, the value shall be determined after allowing the benefit to depreciation as per rates fixed in Boards' Letter dated 26.5.1993. The Respondent has utilized the machinery for nine years and paid duty on transaction value. The machine cleared after putting into use for nine years cannot be treated as Cleared 'as such'. Insertion of proviso w. e. f. 13.11.2007 makes it clear that there is difference between machines cleared without putting into use and cleared after use. The Bombay High Court has upheld the view of the Tribunal in the case of Cummins India Lim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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