Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  GST registration cancellation without reasons amounts to ‘Economic Death’ of business: Supreme Court. *  No GST refund if appeal before GSTAT is filed late: Gujarat High Court. *  Mere upload of GST notice on portal not valid service, appeal limitation won’t start: Punjab & Haryana High Court. *  Taxpayer can’t be penalised for missing notices hidden under ‘Additional Notices/Orders’: Calcutta High Court allows fresh adjudication. *  State tax officer can’t issue GST SCN beyond CBIC-assigned jurisdiction: Bombay High Court stays recovery proceedings. *  Earlier 7.5% Pre-Deposit must count towards mandatory 10% for Appeal: Uttarakhand high court quashes CESTAT Order. *  Third Parties can’t challenge GST Advance Rulings merely due to financial impact: Karnataka HC *  GST SCN generated using AI tool quashed: Punjab & Haryana High Court *  Bank Attachment Quashed as Madras HC Quashes GST Order Issued Against Deceased Person *  ITC Blocking Order for Failure to Record ‘Reason to Believe’ U/R 86A Quashed: Allahabad High Court *  Govt Extends GSTAT Appeal Filing Deadline From 30 June to July 31, 2026 *  GST Demand on RWA Stayed: Allahabad High Court Questions Taxability of Electricity Distribution to Flat Owners *  CBIC Clarifies Jurisdiction After GST Registration Transfer: Earlier Proceedings Remain Valid, New Officer to Continue Action *  GST authorities’ certification not mandatory for reimbursement, but tax payment must be proven: Karnataka HC *  Contractor can’t seek gst reimbursement through writ when contract has arbitration clause: Karnataka HC *  Unsigned Order Is No Order in Law: AP HC Quashes GST Assessment Order for Want of Officer’s Signature *  Customs Can’t Levy Rs. 1.36 Crore Cost Recovery Charges Without Proof of Full-Day Officer Deployment: CESTAT  *  12% IGST Payable On Imported Dialysis Machine Parts: CESTAT *  Bombay High Court Admits Challenge to GST Limitation Extension Notifications; Grants Protection Against Coercive Recovery *  Criminal Case Can’t Run Parallel to GST Proceedings on Same Facts: Allahabad High Court *  Allahabad High Court Stays GST Detention Order; Directs Release of Vehicle and Goods on Deposit of Rs. 1.44 Lakh *  Service Tax Can’t Be Levied on Loss-Making Contracts: Gujarat High Court *  GSTN Mandates Ship-to GSTIN in e-Invoice and e-Way Bill APIs; Introduces Voluntary e-Way Bill Closure Facility from August 1, 2026 *  GST Appeal Can’t Be Rejected as Time-Barred When Taxpayer Was Pursuing Rectification Remedy: Telangana High Court *  Absence of E-Way Bill and Transport Documents Justifies Customs Seizure U/s 110: Gauhati HC *  Madras High Court Upholds GST Late Fee and Penalty for Non-Filing of Annual Return, Dismisses Challenge  *  GST Records, Purchase Documents Sufficient to Discharge Burden Under Customs Act: CESTAT Orders Release of 3.65 Kg Gold  *  No Sugar Cess Payable on Sugar Exported Out of India: CESTAT *  Road Construction Services Exempt and SCN Time-Barred: CESTAT Quashes Service Tax Demand Based Solely on Form 26AS  *  ITC Freeze Upheld After GST Dept Find Suppliers Were Allegedly Fake Bill-Trading Entities: Madras HC 
Subject News *  Input service benefits can’t be denied: CESTAT allows export refund despite MMTC acting as Canalising agency. *  No service tax demand without proof of service of SCN: CESTAT. *  Service tax demand quashed as dept. fails to prove service of SCN: CESTAT *  GST : Mere allegation of inadequate consideration of reply not enough to invoke writ jurisdiction: Delhi High Court *  Onerous conditions imposed for provisional release of seized imported goods shouldn’t amount to virtual denial of relief: CESTAT. *  GST SCN without alleging fraud cannot invoke sec. 74: Karnataka High Court quashes adjudication order. *  Extended Limitation Can’t Be Invoked Merely on Form 26AS Data: CESTAT *  Revenue-Sharing with Restaurants Not Taxable as Business Support Service: CESTAT *  R. 6(3) Option Can’t Be Forced on Taxpayer; CESTAT Quashes Rs. 12.36 Crore CENVAT Credit Demand *  Excise Duty | Power Consumption Alone Can’t Prove Clandestine Manufacture: Karnataka High Court *  Madras High Court Examines DGGI’s Authority to Issue GST Penalty Orders Under Section 122, Adds DGGI as Party *  Proceedings under omitted r. 96(10) can’t survive without saving clause: andhra pradesh high court quashes gst refund recovery *  Excise duty power consumption alone can’t prove clandestine manufacture: karnataka high court *  Madras high court rules GST show cause notices must disclose grounds for invoking extended limitation *  Court Can’t Direct Extension GST Return Deadlines or Waive Interest and Penalties: Karnataka High Court *  GST Notifications Can’t Go Beyond GST Council Recommendations: Madras High Court Quashes SCN on Branded Pulses *  Appeal Can’t Be Dismissed for Delay When Dept’s Own Order Mis-states Limitation Period: CESTAT *  No Evidence of KYC or Due Diligence Breach By Customs Broker: CESTAT Quashes Licence Revocation in Export Overvaluation Case *  Glucometers Are Chemical Analysis Instruments Classifiable Under Tariff Heading 9027: CESTAT *  Validity of Post-GST Service Tax Proceedings Upheld: Gujarat High Court Dismisses Challenge to S. 73 SCN *  Rectified GST Refund Applications Can’t Be Rejected as Time-Barred If Original Refund Claim Was Filed Within Limitation: Gujarat HC *  Service Tax Refund Can’t Be Denied as Time-Barred When Levy Itself Is Unconstitutional: Gujarat High Court *  Same Officer Can’t Act As Auditor & Adjudicator: Karnataka High Court *  Karnataka High Court Condones 324-Day Delay, Revives Customs Appeal in Jewellery Pilferage Case  *  Madras High Court Quashes GST Assessment Order Passed Ex Parte Despite Prior ITC Reversal; Lifts Bank Attachment *  Tobacco Process Doesn’t Amount to Manufacturing: Madras High Court Quashes Rs. 1.32 Crore Compensation Cess Demand  *  Recovery Notice Unsustainable After Voluntary Reversal of Unutilised Credit: CESTAT  *  GST | ‘System Generated’ SCN Without Officer Details Invalid: Allahabad HC  *  Electronic Records Without Statutory Certification Requirements Can’t Justify Undervaluation Allegations: CESTAT *  Madras High Court Stays GST Order, Finds Prima Facie Merit in Plea Against S. 74 Proceedings Based on S. 73 Intimation  

Comments

Print   |    |  Comment

PJ/CASE LAW/2015-16/2774

Whether ‘capital goods removed after use’ would also require full credit reversal?

Case:- COMMISSIONER OF C. EX., COIMBATORE versus LAKSHMI MACHINE WORKS LTD.

Citation:- 2015(321) E.L.T. 577(Mad.)

Brief facts :- Aggrieved by the order of the Tribunal in allowing the appeal filed by the assessee, the appellant/ Revenue is before this court by the filling the present appeal. This court vide order dated 28.03.2008 [2008(229) E.L.T. 445(Tribunal)], admitted the appeal on the following substantial question of law :-
’’ Whether the Honourable CESTAT was correct in holding that ‘capital goods removed as such’ would mean ’’without putting the machinery to any use’’ ?’’
The facts, in a nutshell, are as hereunder :-
The assessee received one ‘speed frame lapping machine’ in the year 1997 and took credit of Rs. 1,37,581/- under the head capital goods. After usage of the machine for about 8 years in the manufacture of final products, the assessee cleared the same by reversing the credit to the extent of Rs. 42,400/-. In view of such removal of goods and availment of Cenvat credit, a show cause notice was issued to the assessee by the Deputy Commissioner of Central Excise, Coimbatore IV Division seeking why the differential amount of Rs. 95,181.26 should not be demanded. However, in view of the decision of CESTAT in the case of M/s. Madura Coats v. CCE, Tirunelveli [2005(190) E.L.T. 450(Tri.-Bang.)], the said proceedings were dropped. Aggrieved against the said order, the revenue preferred appeal before the Commissioner (Appeals).
Upon hearing the parties, the Commissioner (Appeals) held that in terms of Rule3(5) of the Cenvat Credit Rules, 2004, when capital goods on which Cenvat credit had been taken were removed as such from the factory, an amount equal to the credit availed in respect of such capital goods had to be paid. Accordingly, the Commissioner (Appeals) allowed the appeal filed by the Revenue against which the assessee preferred appeal to the Tribunal.
The Tribunal, on a careful consideration of the case and upon hearing either side and carefully considering the decisions placed before it held in favour of the assessee. For better clarity, the relevant portion of the order, is quoted herein below :-
’’ 5. I have carefully considered the records of the case and rival submissions. I find that the appellants had removed ‘used capital goods’ on payment of Rs. 42,400/-. In terms of the ratio of the decision of the Tribunal in Madurai coats case (supra), the appellants are not required to reverse any credit when they removed capital goods after putting it to use for about 8 years. The appellants were required to reverse the credit equal to the credit originally availed only if the capital goods were removed “as such” which meant without putting the machinery to any use. In the facts of the present case, therefore, the appellants were not required to reverse any credit. In the circumstances, the impugned order demanding differential credit of Rs. 95,181/-, interest thereon and impugned penalty on the appellant is not sustainable. Accordingly, the impugned order is set aside and the appeal is allowed.”
 
Appellant’s contention :-It is fairly conceded by the learned standing counsel for the appellant that the issue raised in the present case is squarely covered by the decision of this court in Commissioner of Central Excise, Salem v. M/s Rogini Mills Ltd. [2011(264) E.L.T. 367(Mad.)].

Respondent’s contention :- The learned counsel appearing for the respondent pleaded for upholding the order of the Tribunal.

Reasoning of judgement :- Heard the learned counsel appearing for the appellant and the learned counsel appearing for the respondent and perused the materials available in the typed set of documents. 
Similar question of law fell for consideration before this court in Rogini Mills case (supra), wherein the 1st question of law framed is identical to the one framed in the case on hand. The questions of law framed are quoted hereunder:-
  “1. Whether the expression “as such” appearing in Rule 3(4)(c) of the Cenvat Credit Rules, 2002, would cover used as well as unused capital goods or not?
   2. Whether the assessee is required to reverse credit equivalent to credit taken when used capital goods are removed from the factory or not?”
From a careful perusal of the judgement in Rogini Mills case (supra), it is clear that the view as propounded by the tribunal was upheld by this court on the above substantial questions of law raised. For better clarity, the relevant portion of the judgement in Rogini Mills case (supra) is extracted herein below:-
“ 8. As far as the order of the larger bench of the tribunal reported in 2008 (232) E.L.T. 29 is concerned, we find that though a reference has been made to the addition of the proviso to Rule 3(5) with effect from 13.11.2007, the relevancy of the said addition providing for making as assessment in a depreciated manner i.e. reducing the Cenvat credit at the rate of 2.5% for each quarter of a year from the date of taking Cenvat credit has not been examined. In the circumstances, the order of the tribunal impugned in this appeal cannot be found fault with.
   9. we, therefore, do not find any scope to entertain this appeal, inasmuch as the questions of law sought to be raised at the instance of the appellant have already been correctly answered by the tribunal itself and therefore, we do not find any need or necessity to entertain the said question of law once over again. The order of the tribunal in remanding back to the original authority for re-determination of the amount after allowing depreciation to the extent allowed in the case law cited in its order is sustained. The appeal fails and the same is dismissed. Consequently, M.P. No. 1 of 2010 is also dismissed.”
This court is in agreement with the law as propounded by this court in the above referred to decision. Accordingly, the substantial question of the law is answered in favour of the assessee and against the revenue.
In the result, this appeal fails and the same is dismissed. However, in the circumstances of the case, there shall be no order as to costs.  

Decision :-Appeal dismissed.

Comment :- The analogy of the case is that as per Rule 3(5) of Cenvat Credit Rules, 2004, there is requirement to reverse credit equal to originally availed credit only if the capital goods were removed as such which mean that full credit is required to be reversed if the capital goods are removed without putting the machinery to any use. However, full reversal of credit is not required in case the capital goods are removed after using it for certain period.

Prepared by :- Monika Tak

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