2008 (1) TMI 716 - AT - Central Excise

Reversal of Credit on Capital Goods Sale After 5 Years: Tribunal Allows Appeal

The appeal involved the reversal of credit on capital goods sold after 5 years. The appellant sold CENVAT availed machinery without initially paying duty ... Demand - Removal/Sale of Cenvat availed capital goods - Held that: - In the present case, they have paid duty as per the transaction value which is more than the percentage fixed under this amended notification. There is no infirmity in the impugned order - appeal dismissed - decided against appellant. Issues:1. Reversal of credit availed on capital goods sold after 5 years.2. Interpretation of Rule 3(5) of CENVAT Credit Rules, 2005.3. Applicability of Tribunal rulings on duty leviability for used cenvated capital goods.4. Impact of Notification No. 39/07-N.T. on the case.Analysis:1. The appeal concerned the reversal of credit availed on capital goods that were sold after being used for about 5 years. The appellant had sold the CENVAT availed machinery without paying duty initially, but upon being notified, they paid the duty, Education cess, and interest on the transaction value. The Tribunal noted that Rule 3(5) of the CENVAT Credit Rules, 2005 mandates the reversal or payment of an amount equal to the credit availed when capital goods are removed. However, as there was no specific provision for demanding duty on the removal of used CENVAT availed capital goods, and considering the appellant had paid duty on the transaction value, the method adopted for the removal of the machinery was deemed appropriate. Hence, the impugned order was set aside, and the appeal was allowed.2. The Commissioner had relied on the Tribunal ruling in the case of Madura Coats v. CCE, where it was held that duty is not leviable when used cenvated capital goods are sold. This view was supported by similar decisions from the Mumbai Bench and Chennai Bench. Additionally, the Government of India had issued Notification No. 39/07-N.T., amending Rule 3 sub-rule (5) of the Cenvat Credit Rules to provide for a deduction of 2.5% for each quarter from the date of taking the credit when capital goods are sold. In this case, the appellant had paid duty based on the transaction value, exceeding the percentage specified in the amended notification. Consequently, the Tribunal found no infirmity in the impugned order and rejected the appeal.3. The Tribunal's decision was influenced by the interpretation of Rule 3(5) of the CENVAT Credit Rules, 2005, as well as the precedent set by previous Tribunal rulings and the impact of the government's notification. The consistency in the decisions of various benches and the amendment to the rules played a crucial role in determining the outcome of the appeal. The case highlighted the importance of adhering to statutory provisions and established legal principles in matters concerning the reversal of credit availed on capital goods sold after a period of use.4. The impact of Notification No. 39/07-N.T. on the case was significant, as it amended the rules regarding the deduction applicable when capital goods are sold. By paying duty based on the transaction value, which exceeded the percentage specified in the notification, the appellant demonstrated compliance with the amended provisions. This aspect further supported the Tribunal's decision to uphold the impugned order and reject the appeal, emphasizing the relevance of statutory amendments in determining the legal obligations of parties in such cases.