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TMI Blog2025 (2) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... d order. Aggrieved by this order, the appellant has filed this appeal. 3. The Learned Counsel on behalf of the appellant had submitted that the appellant is a manufacturer of Power Vibratory Compactors, Compressors and Drilling equipments, for the manufacture of the same they procure various capital goods on payment of excise duty on which cenvat credit is availed. In the instance case, the appellant had cleared the used capital goods valued at Rs.7,76,47,919/- on payment of duty of Rs.80,53,153/- on the invoice value. Since the capital goods were put to use, the clearances of the same cannot be considered as capital goods cleared 'as such' hence, the question of reversing the credit as claimed by the Revenue cannot be sustained. It is also submitted that the duty has been rightly discharged on the transaction value at the time of clearance in view of the subsequent amendment to Rule 3(5) of the Cenvat Credit Rules, 2004, vide Notification No.39/2007(NT) dated 13.11.2007. He also relied on the Board Circular No. 643/34/2002-CX dated 01.07.2002 and the decisions in the case of Betts India Pvt. Ltd. Vs. Commissioner of Central Excise: 2022 (381) ELT 749 (S.C.) dated 25.08.2022 and C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ification". It does not have any connection with the goods (capital goods) being new/unused or used. In Sarkar's "Words & Phrases of Excise, Customs & Service Tax", the expression "as such" has been defined as "in or by itself alone". It does not distinguish between a new/unused and a used product. In the case of BILT Industrial Packaging Co. Ltd. v. CCE, Salem - 2007 (216) E.L.T. 217, the Tribunal has brought out how, in Rule 57S(2) as it earlier stood, the expressions "without being used" and "after being used" were mentioned, and subsequently these two clauses were merged into one by using the expression "as such" which clearly shows that the expression is intended to cover both capital goods cleared without use and cleared after being put to use. Ever since the inception of the Modvat/Cenvat Scheme, capital goods, whether used or unused, were allowed to be removed from a factory only on payment of duty or on reversal of Cenvat credit taken. Initially, used capital goods could be removed after reversing proportionate credit depending upon the period of use, as per Notification 23/94-C.E. dated 20-5-1994. This system was later changed to charging duty on used capital goods, clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, it has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared 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 cann ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a case proviso to Rule 9 will apply and provisions of Rule 8 of the valuation rules would have to be invoked. However, this would require determination of the 'cost of production or manufacture', which would not be possible since the said inputs/capital goods have been received by the assessee from outside and have not been produced or manufactured in his factory. Recourse will, therefore, have to be taken to the residuary Rule 11 of the valuation rules and the value determined using reasonable means consistent with the principles and general provisions of the valuation rules and sub-section (1) of Sec. 4 of the Act. In that case it would be reasonable to adopt the value shown in the invoice on the basis of which CENVAT credit was taken by the assessee in the first place. In respect of capital goods adequate depreciation may be given as per the rates fixed in letter F. No. 495/16/93- Cus.-VI, dated 26-5-93, issued on the Customs side". 6.3 The Larger Bench in the case of Commissioner of Central Excise Hyderabad-III Vs. Navodhaya Plastics Industries Ltd. (supra) relied upon by the Revenue referring to the amended provisions has clearly held that : "10. The use of capital goods ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t availed on the value to be assessed on the date of such subsequent sale as capital goods. Such a conclusion by relying upon the above referred to Board's Circular and the letter as well as the addition of proviso to Rule 3(5) with effect from 13-11-2007, is the manner in which the expression 'as such' used in Rule 3(4) can be interpreted. Consequently, the interpretation put in the order of the Principal Bench reported in 2009 (242) E.L.T. 124 merits acceptance. The order of the Tribunal impugned in this appeal applying the said ratio of the Principal Bench is, therefore, perfectly justified." 7. In view of the above, clarification of the Board in 2002 and considering the fact that the Hon'ble High Court of Punjab and Haryana had clearly held that 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'. Similarly, in the present case, since the Department does not dispute the fact that the goods were cleared after being put to use, the question of considering the capital goods cleared 'as such' for the purpose of reversal of credit cannot be susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears that though the said proviso to sub-rule (5) of Rule 3 existed in the 2002 Rules, by a legislature slip, it was not included in the 2004 Rules. As such, to clarify the position, an amendment was carried out in 2007 to bring it in tune with Rule 57-S(2)(b) of the 1944 Rules. 12. Having held that the amendment was clarificatory, in our view, the High Court erred in answering the question against the appellant. 13. Having held the 2007 amendment to be clarificatory, the effect would be that the said proviso existed in the statute book from 2004 itself. This being the position, the appellant was entitled to take benefit of the said proviso and make an adjustment as per the said proviso. 14. We accordingly allow this appeal and quash and set aside the impugned judgment and order of the High Court. The question of law as framed by the High Court is held in favour of the appellant. The demand issued by the revenue is quashed and set aside". 8. Considering the above facts and the settled law, I do not find any reason to deny the benefit of depreciation to the used capital goods for discharging the duty on the reduced value at the time of clearance. Accordingly, the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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