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TMI Blog2007 (6) TMI 47X X X X Extracts X X X X X X X X Extracts X X X X ..... view that the above alienation of property by the appellants involved removal of the capital goods from their factory and, therefore, they were liable to pay an amount equivalent to the capital goods credit under Rule 3(4) of the Cenvat Credit Rules, 2002. Accordingly, in a show-cause notice, the department demanded the above amount from the appellants under Rule 3(4) ibid read with Section 11A of the Central Excise Act together with interest thereon under Section 11AB of the Act and also proposed to impose penalty on them under Rule 25 of the Central Excise Rules, 2002. The appellants filed writ ten submissions with the Commissioner contesting the above demand on numerous grounds. In adjudication of the dispute, the Commissioner confirmed the demand of duty (with interest thereon) against the appellants and imposed on them a penalty of Rs. 50 lakhs. Hence the present appeal. 2. The main challenge in this appeal is against the demand made under sub-rule (4) of Rule 3 of the Cenvat Credit Rules, 2002 (CCR for short), which reads as under : "(4) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in denial of MODVAT credit availed on capital goods and inputs in a factory which underwent change of ownership was set aside. 4. Learned SDR relied on the decision in Majestic Auto Ltd. v. Commissioner of Central Excise, Ghaziabad [2004 (173) E.L.T. 145 (Tri. - Del.)], wherein capital goods installed in a factory transferred by the assessee (lessor) to their lessee under a lease agreement were held to have been 'removed' from the factory for home consumption and accordingly, the Modvat credit taken by the assessee on the capital goods was held to be recoverable. Learned SDR also relied on Steel Authority of India v. Commissioner of Central Excise, Bhubaneswar [2006 (201) E.L.T. 114 (Tri.-Del.)], wherein the Bench noted a conflict of decisions on the substantive issue and referred the same to a Larger Bench, after taking the view that the sale of a captive power plant along with credit-availed capital goods by the assessee involved removal of the capital goods from the factory. Learned SDR reiterated the interpretation given to Rule 3(4) of the CCR by the adjudicating authority, and submitted that the sale of the factory by the appellants to M/s. ITC Ltd. involved a transfer of po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l goods are removed without being used from the factory for home consumption, on payment of duty, or for export on payment of duty of excise, such, duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such capital goods under Rule 57Q; (b) where capital goods are removed after being used in the factory for home consumption on payment of duty of excise or for export under rebate on payment of duty of excise, such duty of excise shall be calculated by allowing deduction of 2.5 per cent of credit taken for each quarter of a year of use or fraction thereof, from the date of availing credit under Rule 57Q and (c) where capital goods are sold as waste and scrap, the manufacturer shall pay the duty leviable on such waste and scrap." It appears that clause (c) of sub-rule (2) of Rule 57-S covered a case of removal of capital goods as waste and scrap from the factory by the manufacturer of final product, while clauses (a) and (b) of the sub-rule covered two different cases of removal of capital goods as such from the factory by the manufacturer of final product. Though the expression 'as such' was not used in clause (a) or clause (b) of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of excisable goods under Rule 11 of the CER, 2002 is, beyond doubt, physical removal of the goods, Rule 4 of the CER, 2002 (which corresponds to Rule 9 of the erstwhile CER, 1944) mandates that no excisable goods, on which any duty is payable, shall he removed from factory/warehouse without payment of duty. The scheme is quite clear. Duty of excise can be collected only at the stage of removal of the excisable goods from the factory/warehouse and such removal must be effected under an invoice issued by the owner of the factory or his authorised agent. Interpretation of sub-rule (4) of Rule 3 of CCR, 2002 has to be harmonious with this scheme. Accordingly, for a manufacturer of final products to be asked to pay an amount equal to the credit availed by him in respect of his capital goods, under Rule 3(4) of the CCR, 2002, the Revenue must satisfy at least two conditions viz. (a) the capital goods must have been physically re moved from his factory and (b) such removal should be under cover of invoice referred to in Rule 7 of the CCR, 2002 read with Rule 11 of the CER, 2002. But Rule 11 of the CER, 2002 stipulates that removal of excisable goods from a factory/warehouse must be made u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ler Automotive Profiles (supra) was apparently not cited before the Bench which dealt with the case of Majestic Auto Ltd. Learned SDR has relied on the referral order passed by a co-ordinate Bench in the case of SAIL. We note that the question referred by the said Bench was not addressed by the Larger Bench, which returned the case to the regular Bench for decision on merits. The subsequent decision of the regular Bench vide Final Order Nos. 80-81/07 ibid, in the case of SAIL, is rather against the Revenue. The view taken by the regular Bench in the referral order was only tentative and the same was subject to final view of the Larger Bench. But the Larger Bench did not take any view on the referred issue, with the result that the view taken by the regular Bench in the referral order continued to be tentative. Ultimately, the final order passed by the regular Bench in SAIL's case on merits went in favour of the assessee, thereby extinguishing the tentative view taken earlier in the referral order. Consequently, the view expressed in the referral order vide 2006 (201) E.L.T. 114 (Tri.-Del.) has no precedent value. 8. Coming back to the substantive issue, we think, we must take note ..... X X X X Extracts X X X X X X X X Extracts X X X X
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