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M/s Hindustan Coca-Cola Beverages Pvt Ltd, Shri Suresh Shinde, Shri KVR Subramaniam, Shri Ashish Desai Versus Commissioner of Central Excise, Thane-I

2015 (10) TMI 847 - CESTAT MUMBAI

Reversal of Credit / Demand of duty - removal of Capital goods after use on which no credit was taken initially - Held that:- During the relevant period that capital goods on which CENVAT Credit has been taken are removed from the factory of the manufacturer of final product is required to pay an amount equivalent to the duty of excise on the said capital goods on removal. As is noted from the facts that the appellant here-in had not manufactured any goods at the factory premises, which were pur .....

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of CENVAT Credit on the capital goods by the said M/s. McCoy. In my considered view, the department should have demanded the Central Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets they have parted with the capital goods on which CENVAT Credit was availed.

There was a transfer of running industrial unit to the appellant there-in hence the High Court has come to a conclusion that the successor is liable to discharge the excise .....

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5-WZB/SMB - Dated:- 13-4-2015 - M V Ravindran, Member (J) For the Petitioner : Shri Naresh Thacker, Adv For the Respondent : Shri Ashutosh Nath, Asst. Commissioner (AR) ORDER Per M V Ravindran These appeals are directed against Order-in-Appeal No. VSK/38 to 41/Th-I/2009 dated 16.12.2009. 2. Since all the appeals are arising out of the very same impugned order, they are being disposed of by a common order. 3. Relevant facts that arise for considerations are that M/s. Hindustan Coca-Cola Beverages .....

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l goods which were cleared by them were purchased outright from M/s. McCoy Bottling Company Pvt. Ltd. (M/s. McCoy in short) under asset purchase agreement and no CENVAT Credit was availed on the same by the main appellant on such capital goods. Adjudicating authority did not agree with the contentions raised by the appellants and confirmed an amount as ineligible of CENVAT Credit, interest thereof and also imposed penalties on all the appellants. Aggrieved by such an order, all the appellants pr .....

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hat McCoy had availed CENVAT Credit on various capital goods purchased by them and were engaged in the manufacture of mineral water, aerated water and various other excisable goods. It is his submission that the CENVAT credit availed by M/s. McCoy was never in dispute. He then took me through the order-in-original, more specifically para no. 39, and submit that it is an admitted fact that M/s.McCoy after availing CENVAT Credit on the capital goods utilized the same on clearance of the finished g .....

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through the records and submits that the Central Excise Registration granted to M/s. McCoy was surrendered and no objection was raised by the department as to ineligible availment of CENVAT Credit by the said M/s. McCoy and no demands were also raised on them for the clearance of the capital goods. After taking me through Order-in-Appeal which is impugned before the Tribunal, he would submit that the first appellate authority has totally mis-interpreted the provisions of Cenvat Credit Rules, 20 .....

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ey had not availed CENVAT Credit on the capital goods purchased from M/s. McCoy and did not discharge the duty liability on the same capital goods when cleared to their sister concern. He would submit that the impugned order be set aside and the appeals be allowed. 5. Learned Departmental Representative reiterated the findings of the lower authorities and he would read the provisions of CENVAT Credit during the relevant period from the impugned order. He would submit that the appellant is requir .....

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it Rules, 2002. He would rely upon the decision of the Hon'ble Apex Court in the case of Macson Marbles Pvt. Ltd. vs. Union of India - 2003 (158) ELT 424 (S.C.), Hero Motors Ltd. vs. CCE - 2014 (310) ELT 729 (All.) and Autolite(India) Ltd. vs. Commissioner - 2003(154) ELT A169 (S.C.) for the proposition that the liability to pay excise duty dues will get transferred on transfer of industrial units and successor needs to discharge the said liability. 6. Learned Counsel in rejoinder would subm .....

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s of the said M/s. McCoy to be recovered from the main appellant. On the other hand, he would rely upon the judgment of the Hon'ble Supreme Court in the case of CCE v. Jamshedpur Beverages - 2007 (214) ELT 321 (S.C.) for the proposition that the revenue neutrality will arise in such situation like this in hand. He also relied upon the ratio of the decision of the Hon'ble High Court of Gujarat in the case of CCE & Service Tax v. Patel Alloys Steel P. Ltd. - 2014 (305) ELT 476 (Guj.) f .....

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the proposition that till the amendment of CENVAT Credit Rules 2004 as on 13.11.2007 in respect of used capital goods there was no liability to pay duty prior to that date and it was only that addition of the proviso thereto, that the situation changed. 7. I have considered the submissions made at length and perused the records. 7.1 On perusal of the records it transpires that the issue involved in this case is regarding the demand of CENVAT Credit availed by the appellant's predecessor in r .....

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. McCoy in any form. It is also undisputed that the capital goods which were purchased by the main appellant from M/s. McCoy were procured by the said M/s. McCoy during the period 1997-98 and availed CENVAT Credit which is not disputed by the department; the said capital goods were put to use by M/s. McCoy and dutiable final goods were manufactured and cleared on discharge of Central Excise duty and also utilising the CENVAT Credit of the capital goods availed by M/s. McCoy. 7.2 On this factual .....

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reads as under: "(1C) When inputs or capital goods, on which credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of such removal and on the value determined for such goods under section 4 of the said Central Excise Act, and such removal shall be made under the cover of an invoice referred to in rule 52A." 7.3 I .....

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the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7." It can be noticed from the above reproduced provisions during the relevant period that capital goods on which CENVAT Credit has been taken are removed from the factory of the manufacturer of final product is required to pay an amount equivalent to the duty of excise on the said capital goods on removal. As is noted from the facts that the appellant here-in had not manufactured a .....

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y as to the CENVAT scheme placed onus on the user of CENVAT Credit to maintain proper documents and accounts hence the main appellant is liable to discharge the duty liability, is also incorrect inasmuch as, it is on record that the main appellant here-in has not utilised CENVAT Credit of the capital goods which were received by M/s. McCoy. The first appellate authority has also recorded in the findings that non-transfer of CENVAT Credit does not mean non-applicability of CENVAT scheme to the ap .....

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Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets they have parted with the capital goods on which CENVAT Credit was availed. 7.4 I find that ratio of the judgment of the Hon'ble Karnataka High Court in the case of Solectron Centum Electronics Ltd. (supra) is very pertinent in these cases. In that case, the High Court has considered the provisions of Rule 3(4) of the Cenvat Credit Rules, 2004 and after analyzing the entire provisions .....

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shall be made under the cover of an invoice referred to in rule 7." 11. The liability to pay duty on capital goods arises after the capital goods have been removed as such. The word "as such" is being the subject matter of interpretation by the various Courts. Punjab and Haryana High Court in the case of Commissioner of Central Excise, Ludhiana vs. Khalsa Cotspin (P) Ltd., reported in 2011 (270) E.L.T. 349 (P & H) has held as under: "The assessee having validly availed c .....

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Appellate Tribunal which has held as under: "The plain and simple meaning of expression "as such" would be that capital goods are removed without putting them to use. Admittedly, in the present case capital goods have been used for a period of more than 7 to 8 years. As such, 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 sai .....

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e appellant purchased the capital goods in the period between 2003 and 2005 and used them in its factory till they were sold to M/s Harsh International (Khaini) Pvt. Ltd., in June and July, 2007. Thus the capital goods were used for a period of 2 to 4 years. They cannot, therefore, be stated to be sold "as such" capital goods. They were sold as used capital goods." 14. Therefore, it is clear, till the law was amended as on 13.11.2007 in respect of used capital goods, there was no .....

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