Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *   CBIC issues draft rules for Customs valuation *  Top Headlines: Threshold for Benami deals, green bond investors, and more *  Govt aims 1-hour clearance for goods at all ports *  Exporters Allowed To Use RoDTEP, RoSCTL Scrips To Pay Customs Duty, Transfer Them; Rules Amended *  Millions of labourers to be affected by brick producers’ strike over hike in GST, coal rates *  Inauguration of ‘kendriya GST parisar’ *  Transporter can seek Release of Conveyance alone, not Goods under GST Act: Madras HC *  GST: Quoting of DIN Mandatory for Responding to Notice, Govt Modifies Portal *  Firms can soon file claims for GST credits of ?400 cr *  CBIC issues modalities for filing transitional credit under GST. *  Mumbai: Man creates 36 fake GST firms, arrested for input tax credit fraud of Rs 23 cr *  Report to restructure Commerce Ministry under study; idea is to set up trade promotion body: Goyal *  Firms can soon file claims for GST credits of ?400 cr *  Gambling Alert! Govt May Levy Up To 28% GST; UP, Bengal Back Move *  EPFO backs raising retirement age to ease pressure on pension funds *  India Moving Up Power Scale, Set to Become Third Largest Economy By 2030 *  Airfares Get Expensive: What Changes for Flyers From Today? *  IRCTC Latest News: Passengers to Pay More For Cancelling Confirmed Rail Tickets Soon. *  IBC prevails over Customs Act, says Supreme Court. *  As GST enters sixth year, a time for evaluation and reassessment *  There’s GST on daily essentials as Centre needs money to buy MLAs: Arvind Kejriwal *  Now, GST on cancellation of confirmed train tickets, hotel bookings *  GST kitty for top States could rise 20% in FY23, says Crisil *  French customs officials seize another cargo vessel over Russia sanctions *  TradeLens builds on Asia momentum with Pakistan Customs deal *  Hike tax on tobacco, reduce affordability & increase revenue: Civil society organizations to GST council *  Bihar: ?10 crore tax evasion on tobacco products detected in raids *  Centre failed on GST, COVID; would it be anti-national? Rajan on Infosys row *  Service Tax not Chargeable on Income Tax TDS portion paid by recipient: CESTAT grants relief to TVS *  Foreign portfolio investors make net investment of Rs 7575cr in Sep so far
Subject News *  Run-up to Budget: Monetary threshold for GST offences may rise to Rs 25 cr *   GST (Tax) E-invoice Must For Businesses With Over Rs 5 Crore Annual Turnover *   Both Central GST and excise duty can be imposed on tobacco, rules Karnataka high court *   CBIC Issues Clarification On Extended Timelines For GST Compliance *   CBIC Issues Clarification On Extended Timelines For GST Compliance *  Budget 2023- 9.6 crore gas connections *  GST: Tamil Nadu Issues Instructions for Assessment and Adjudication Proceedings *  GST: CBIC Extends Last Date for filing of ITC *  GST collection in September surpasses Rs 1.4 lakh crore for straight seventh time *  Dollar smuggling case: Customs chargesheet names M Sivasankar as key conspirator. *  Hike in GST rates fuels inflation *  Assam: CBI arrests GST commissioner in Guwahati *  GST fraud worth ?824cr by 15 insurance Cos detected *  India proposes 15% customs duties on 22 items imported from UK *  Decriminalising certain offences under GST on cards *  Surge in GST collections more due to higher inflation: India Ratings *  MNRE Notifies BCD and Hike in GST Rates as ‘Change in Law’ Events But With a Condition | Mercom India *   Solar projects awarded before customs duty change allowed cost pass-through *  Rajasthan High Court Dismisses Writ Petitions Challenging Levy Of GST On Royalty *   GST revenue in September likely at Rs 1.45 lakh crore *  Govt working on decriminalising certain offences under GST, lower compounding charge *  Building an institution like GST Council takes time, trashing is easy: Sitharaman *  GST collections in Sept may touch ?1.5 lakh crore *  KTR asks Centre to withdraw GST on handlooms *  After Gameskraft, More Online Gaming Startups To Receive GST Tax Claims *  Madras HC: AAR Application Filed Under VAT Does Not Survive After GST Enactment *  Threshold for criminal offences under GST law may be raised *  Bengaluru: Gaming company faces biggest GST notice of Rs 21,000 crore *  CBIC clarifies Classification of Cranes for GST, Customs Duty *  Customs seize gold hidden in bicycle in Kerala airport  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2979

On removal of part of capital goods after use on payment of duty, whether the entire cenvat credit can be denied?

Case-COMMISSIONER OF C. EX.& S.T.,VAPI Versus N.R. AGARWAL

Citation-2015 (326) E.L.T.364 (Tri.-Ahmd.)

Brief Facts-This appeal has been filed by the Revenue against OIA No. KRS/107/VAPI/2008, dated 31-3-2008 issued on 7-4-2008. The issue involved in this appeal is whether the appellant is required to pay duty under Rule 3(4) of the Cenvat Credit Rules, 2002 with respect to those capital goods on which Cenvat credit is taken but are cleared as waste and scrap after its long usage in the factory of manufacture.

Appelants Contention-Shri G.P. Thomas (AR) appearing on behalf of the Revenue relied upon the judgment of Madras High Court in the case of CCE, Salem v. Rogini Mills Limited [2011 (264)E.L.T.367 (Mad.)] to argue his point that at the time of removal of capital goods after use the quantum of credit taken is required to be reversed based on depreciated value of the capital goods, as per the provisions of Rule 3(4)(c) and 3(5) of Cenvat Credit Rules, 2004.

Respondents Contention-Shri S. Suriyanarayanan, (Advocate) appearing on behalf of the respondents on the other hand relied upon the following case laws to put forth his view point that at the relevant time capital goods removed as such would mean that the capital goods are not installed on which Cenvat credit was taken :-
(a)       Raghav Alloys Limited [2011 (268)E.L.T.161 (P & H) = 2012 (26)S.T.R.87 (P & H)
(b)       Cummins India Limited [2007 (219)E.L.T.911 (Tri.-Mum.)]
(c)       Navodhaya Plastic Inds. Limited [2013 (298)E.L.T.541 (LB)
It was his case that only a part of the capital goods (De-linking Cell) was cleared as waste and scrap as per second paragraph of the show cause notice, dated 23-9-2004. It was also argued by learned advocate that adjudicating authority has gone beyond the scope of show cause notice while arguing that capital goods were never put to use. Learned advocate made the Bench go through paragraph 16 of the OIO, dated 20-12-2006 and argued that only De-linking cell was removed by the respondent which was a part of De-linking Plant imported by respondent; that entire Service Tax credit of Rs. 13,79,969/- was availed with respect to De-linking Plant and no separate CVD was paid with respect De-linking Cell. It was his case that Cenvat credit for the entire De-linking plant cannot be disallowed merely on the ground that a part of De-linking plant was sold as De-linking Cell for which separate CVD paid at the time of import is not calculated by the Revenue.
 
Reasoning Of Judgement-Heard both sides and perused the case records. The issue involved in the present proceedings is whether the Cenvat credit is required to be reversed with respect to capital goods which are used in the manufacturing activities and after a long period of use, a part of total capital goods, on which credit is taken, is cleared as waste on payment of Excise duty based on transaction value of the scrap sold. It is observed from the judgment of Punjab & Haryana High Court in the case of CCE, Chandigarh v. Raghav Alloys Limited [2011 (268)E.L.T.161 (P&H)] that during the relevant period no Cenvat credit was required to be reversed if the capital goods are cleared after utilisation and are not cleared as such. In this regard Para 8 of this judgment is relevant and is reproduced below:-
“8. We have heard arguments of both the ld. Counsel. The Tribunal has rightly noted that unlike inputs, which get consumed 100% with the same are taken up for use in relation to manufacture of finished goods, capital goods are used over a period of time. The capital goods loose their identity as capital goods only when after use over a period of time, the same has become in-serviceable and fit to be scrapped. The object of Cenvat credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple 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 Board’s 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 cannot be treated as Cleared ‘as such’. Insertion of proviso w.e.f. 13-11-2007 makes it clear that there is difference between machines cleared without putting into use and cleared after use. The Bombay High Court has upheld the view of the Tribunal in the case of Cummins India Limited v. CCE, Pune-III - 2007 (219)E.L.T.911 (Tri.-Mumbai). The Tribunal in the case of Nahar Fibres has also dismissed Appeal of the Revenue and there is nothing to show that the said decision of the Tribunal has been set aside by any Court.”
In the present proceedings there is no evidence relied upon in the show cause notice that part of capital goods cleared was not put to use. The ratio of relied upon case laws by Respondent is squarely applicable tothe facts of this case.
It is also observed from the case records that Cenvat credit of Rs. 13,79,969/- was taken by respondent with respect to the entire De-linking Plant imported whereas a part of De-linking plant was sold which is described as ‘De-linking Cell’ on which respondent paid duty amount of Rs. 1,84,000/-. There is no allegation in the show cause notice, dated 23-9-2004 that De-linking plant was sold as such and not after use. There is no specific finding of the lower authorities that De-linking plant was sold as such in the guise of scrap. There is no evidence on record that entire De-linking plant on which Service Tax credit Rs. 13,79,969/- was removed by the respondent. Thus for removing a part of De-linking plant after use on payment of duty, entire Cenvat credit cannot be denied. In view of the above observations the appeal filed by the Revenue is required to be rejected. Accordingly, appeal filed by the Revenue is rejected.
 
Decision-Appeal Rejected

Comment-On following the judgment of Punjab & Haryana High Court in the case of CCE, Chandigarh v. Raghav Alloys Limited no Cenvat credit was required to be reversed if the capital goods are cleared after utilisation and are not cleared as such. And as in the given case after a long period of use, a part of total capital goods, on which credit is taken, is cleared as waste on payment of Excise duty based on transaction value of the scrap sold and as no evidence has been produced to indicate that goods were cleared as such in guise of scrap, it cannot be treated as cleared as such. Therefore on removal of part of the capital goods after use on payment of duty, entire Cenvat credit could not be denied.
 
Prepared By-Neelam Jain
 

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com