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of <h1>Appellate authority upholds duty on capital goods removed after use, clarifies CENVAT credit rules</h1> <h3>M/s Hindustan Coca-Cola Beverages (P) Ltd. Versus The Commissioner of Central Excise, Guntur.</h3> M/s Hindustan Coca-Cola Beverages (P) Ltd. Versus The Commissioner of Central Excise, Guntur. - TMI Issues:1. Liability to reverse CENVAT credit on capital goods removed after use.2. Interpretation of Rule 3(4) of the CENVAT Credit Rules, 2002.3. Application of the proviso to Section 11A(1) of the Central Excise Act.4. Imposition of penalties in case of duty demand.Analysis:1. The appeal concerns the demand of duty raised on the assessee by the appellate Commissioner under Rule 3(4) of the CENVAT Credit Rules, 2002 for capital goods removed from the factory after being used and depreciated. The department contended that CENVAT credit should be reversed on the original value of the goods at procurement. The original authority dropped proceedings based on precedent but the Commissioner (Appeals) upheld the demand based on a different interpretation of Rule 3(4) following Modernova Plastics (P) Ltd. vs. CCE, Raigud. The appellate authority demanded the difference between CENVAT credit and duty paid on the depreciated value.2. The learned counsel for the appellant cited various decisions, including Commissioner of C. Ex., Ludhiana Vs. Khalsa Cotspin (P) Ltd., to argue that the issue of reversing CENVAT credit on used capital goods is settled. The Tribunal held that the expression 'removed as such' in Rule 3(4) of the CCR, 2002 means removal without prior use in manufacturing. The High Courts of Punjab & Haryana and Madras supported this interpretation, which was consistently followed.3. The Commissioner refrained from imposing penalties on the assessee despite the duty demand. The Tribunal, following binding judicial authorities, held that the payment of duty on the depreciated value of the capital goods was in accordance with the law. The demand for differential duty was set aside, and the appeal of the assessee was allowed.4. An appeal by the department regarding penalties was mentioned, but its disposition was pending due to listing issues. The fate of this appeal was to be decided on a future date. The judgment concluded by setting aside the duty demand and allowing the appeal of the assessee based on the interpretation of relevant legal provisions and precedents.
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