TMI Blog2022 (3) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its manufacture of ferro silicate products which are excisable. At the time of purchase of the capital goods, the assessee availed of the CENVAT credit benefit and paid much less duty or no duty on the capital goods than the goods may otherwise have attracted. Some time down the line, the assessee was desirous of removing the relevant goods from its manufacturing unit. It is in such context that Rule 3(5) of the then CENVAT Credit Rules, 2004 becomes relevant as it provides as follows: Rule 3. CENVAT credit (1) ... (2) ... (5) 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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the exemption applies only to the case of manufactured goods and not to any capital goods. It transpires that the concerned Assistant Commissioner of Excise, under a mistaken impression that the refund sought was in respect of the goods manufactured by the assessee and it did not pertain to the capital goods covered by Rule 3(5) of the CENVAT Credit Rules, 2004, made a refund to the tune of ₹ 1.58 crore. By a show-cause notice dated September 24, 2007, the assessee was required to show cause why the amount of refund to the extent of about ₹ 1.58 crore that had been erroneously made should not be paid back by the assessee to the department. Several lines of defence were taken by the assessee in response to the show cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the capital goods would be nominal. However, 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. The distinction was not originally there in Rule 3(5) of the said Rules and came to be incorporated only in 2007. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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