Whether duty payable on transaction value or credit reversal required on clearance of used capital goods?

PJ/Case Law/2014-15/2131

Case:-PACKAGING INDIA PVT LTD Vs COMMISSIONER OF CENTRAL EXCISE, PUDUCHERRY

Citation:- 2014-TIOL-350-CESTAT-MAD

Brief facts:-The appellant is engaged in the manufacture of printed and laminated articles of plastic and flexible plastic packing materials classifiable under Chapter 39 of the Central Excise Tariff Act, 1985. They availed cenvat credit of inputs and capital goods. In the present case, the appellant availed cenvat credit on capital goods namely MS copper coated rollers and after use in several times, they cleared the same as scrap on payment of duty on transaction value. There is a demand of duty of Rs.28,27,723/- along with interest and penalty for the period December 2008 to September 2009 holding that appellant is liable to reverse the cenvat credit originally taken on the capital goods. The Commissioner (Appeals) directed to pre deposit of Rs.14 lakhs under section 35F of the Central Excise Act, 1944 and if pre deposit is not paid as ordered, the subject appeal stands dismissed automatically.

Appellant’s contentions:- Ld. Advocate submits that they have filed application for modification of stay order which is not taken into consideration and the appeal is dismissed for non-compliance. Therefore, they filed this appeal before Tribunal. He submits that in this case after use, the capital goods were cleared to their Cuddalore unit for making fresh engravings. It is also submitted that Cuddalore unit availed credit and paid duty on the fresh engravings which is again returned back to their factory. He further submits that, on this issue, the Tribunal in their own case for the earlier period granted unconditional stay which is not considered by the Commissioner (Appeals). It is also submitted that various High Courts and Tribunal have held that the assessee is not required to reverse the credit originally availed by them at the time of receipt of capital goods, when the said capital goods are subsequently removed as old, damaged and serviceable capital goods.

Respondent’s contentions:-On the other hand, Ld. AR for Revenue submits that decisions of Larger Bench of Tribunal in the case of Modernova Plastyles Pvt. Ltd. Vs CCE Raigad - 2008 (232) ELT 29 (Tri.LB) = (2008-TIOL-1771-CESTAT-MUM-LB) and Tribunal's decision in Golden Tobacco Ltd. Vs CCE Mumbai - 2013 (292) ELT 373 (Tri.-Mumbai) are in favour of Revenue.

Reasoning of judgment:-We find that the Tribunal on this issue granted unconditional stay in appellant's own case. However, appellant filed modification of stay order passed by the Commissioner (Appeals) which was not considered by him and the appeal was dismissed automatically. In view of that, it is appropriate to set aside the impugned order and remand the matter back to the Commissioner (Appeals) to decide the stay application after considering the case law submitted by the appellant. In view of that, we set aside the impugned order and matter is remanded back to the Commissioner (Appeals) to decide the stay application after considering the submission of appellant. It is needless to say that Commissioner (Appeals) will give proper opportunity of hearing before decision.

Decision:- The appeal is allowed by way of remand.

Comment:- The essence of the case is that various High Courts and Tribunal have held that the assessee is not required to reverse the credit originally availed by them at the time of receipt of capital goods when the said capital goods are subsequently removed as old, damaged and serviceable capital goods and that the excise liability is sufficiently discharged if the duty has been paid on the transaction value of the used capital goods. Inspite of this fact, the pre-deposit was ordered to be paid by the assessee. Accordingly, as the case laws relied upon by the assessee were not at all considered, the appeal was allowed by way of remand with a direction to the Commissioner Appeals to consider the stay application afresh after providing reasonable opportunity of hearing to the assessee.

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PJ/Case Law/2014-15/2131

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