TMI Blog2023 (7) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... the phrase as such and rejected the argument of the revenue that the reversal of credit much be total. On a conjoint reading of Rule 3(4) of the 2002 CCR, the 2002 Circular and 1993 Board Letter, the Bench concluded that the assessee was entitled to the benefit of depreciation in arriving at the assessable value of the goods - This decision has also been followed by a larger Bench of the CESTAT in the case of Navodhaya Plastic Industries Ltd [ 2013 (12) TMI 82 - CESTAT CHENNAI] . The Bench has, therein, noted the practice of bringing in capital goods for use for a short period and removal to another unit without reversal of CENVAT Credit availed, finding it to be an abuse of the scheme of CENVAT credit. The purpose of the scheme must thus be understood to provide a balance between the grant of credit and checking of abuse in the availment of the same. The appellant cannot be agreed upon that the above Rule would be applicable in the present case. Rule 4 sets out the preconditions for availment of credit. One of those conditions is that no credit shall be allowed in respect of that part of the value of capital goods that represents duty amount which the manufacturer claims as d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the Income Tax Act, 1961. 4. The officials were of the view that the straight line method ought to have been adopted as prescribed by the Central Board and Excise and Customs (in short 'CBEC') under Circular No.643/34/2002 CX dated 01.07.2002 (in short 2002 Circular ) read with Board's Letter No.495/16/93 CUS IV, dated 26.05.1993 (in short 1993 Board Letter ). This is the narrow controversy before this Court. 5. The book value of the machineries transferred from Unit A to B had been adopted for the purpose of reversal of CENVAT Credit. The officials noted that the original assessable value of the capital goods was a sum of Rs.1,67,20,299/- and the credit availed thereupon was a sum of Rs.20,60,055/-. The value adopted at the time of transfer was Rs. 61,52,111/- claiming depreciation on WDV method, and the removal was on payment of duty of Rs.9,84,338/-. In doing so the Appellant relied upon Rule 4(4) of the Cenvat Credit Rules 2002 (in short CCR 2002 ). 6. Per contra, the scale of depreciation to be adopted per the Department, that applied the stipulation under the 1993 Board Letter, was as follows: (i) for every quarter during the 1st year 4% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit Rules, in respect of removal of used capital goods as such, during the year 2002-2003 ? 2) Whether the First Respondent erred in directing to apply straight line method of depreciation effective from 13-11-2007 read with amended Rule from 27-2-2010 by Notification No.6/2010-CE(N.T) which was not prescribed during the period of removal of such capital goods (ie.,) Financial year 2002-03 ? 3) Whether the First Respondent's order is retrograde in nature while rejecting the application of Section 32 of the Income Tax Act, 1961, for depreciation used capital goods? 4) Whether the First Respondent Tribunal violated the principles of natural justice in placing the Circulars No.643/34/2002 dated 1-7-2002 read with Circular No.495/16/1993-Cus. dated 26-5-1993 without applying Section 32 of the Income Tax Act, 1961 ? 5) Whether the impugned order passed by the learned First Respondent Tribunal is proper and legal? 13. The reversal of credit at the time of transfer of goods has been provided for in the Rules applicable from time to time. During the period 01.03.1997 to 01.04.2000, Rule 57Q and 57S of the Central Excise Rules stipulated the manner of utilisati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e under the cover of an invoice referred to in rule 7. 16. One issue that has arisen in several cases relating to the reversal of credit relates to the understanding of the phrase as such in the above Rule. While the Department contended that the entirety of the credit availed would have to be reversed, it was the contention of the assessees that such total reversal would only arise if the removal of the goods was in as such condition, that is, without having been put to use. 17. Thus, in cases where the goods had been put to use, a deduction was to be given, to provide for their depreciation. The Appellant has referred to the following cases wherein the issue for consideration touched upon the interpretation of the phrase as such . (i) Commissioner of C.Ex Salem V Rogini Mills (264 ELT 367) (ii) Commissioner of C. Ex Ludhiana V Khalsa Cotspin (P) Ltd (270 ELT 349 (iii) Harsh International (Khaini) Pvt Ltd V Commissioner of Central Excise (281 ELT 714) (iv) Commissioner of C.Ex Hyderabad V Navodahaya Plastic Industries (298 ELT 541) 18. This Court in the case of Rohini Mills Limited (supra) considered the import of the phrase as such and reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts of doubt under The New Valuation Provisions introduced w.e.f. 1.7.2000 . 14. How will valuation be done when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, under the erstwhile sub rule (1C) of rule 57AB of the Central Excise Rules, 1944, or under rule 3(4) of the Cenvat Credit Rules, 2001 or 2002? Where inputs or capital goods, on which credit has been taken, are removed as such on sale, there should be no problem in ascertaining the transaction value by application of sec.4(1)(a) or the Valuation Rules. [provided tariff values have not been fixed for the inputs or they are not assessed under Section 4A on the basis of MRP] There may be cases where the inputs or capital goods are removed as such to a sister unit of the assessee or to another factory of the same company and where no sale is involved. It may be noticed that sub rule (1C) of Rule 57AB of the erstwhile Central Excise Rules, 1944 and Rule3(4) of the Cenvat Credit Rules, 2001( now 2002), talk of determination of value for such goods and not the said goods . Thus, if the assessee partly sel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... % (b) for capital goods, other than computers and computer peripherals @2.5% for each quarter.] 26. According to the appellant, Rule 4(4) of the CCR 2004 would fully support its claim that the reduction from assessable value should be in line with the provision for depreciation under the Income Tax Act, 1961. In the interests of completion, the above Rule is extracted below: Conditions for allowing CENVAT credit. 4.(1)............ (4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961). 27. We are not in agreement with the appellant that the above Rule would be applicable in the present case. Rule 4 sets out the preconditions for availment of credit. One of those conditions is that no credit shall be allowed in respect of that part of the value of capital goods that represents duty amount which the manufacturer claims as depreciation under the Income tax Act 1961. 28. This, by no means, can be understood to relate to Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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