2012 (12) TMI 382 - AT - Central Excise

Tribunal rules in favor of appellant on Cenvat Credit Rule 3(5) case

SHREE RAJASTHAN SYNTEX LTD. Versus COMMISSIONER OF C. EX., JAIPUR

The Tribunal ruled in favor of the appellant, finding that Rule 3(5) of the Cenvat Credit Rules, 2004 did not apply to the case concerning the payment of ... Cenvat credit denied - Capital goods removed after use – Held that:- The capital goods i.e. D.G. Sets and Water Heat Recovery Equipment were disposed of in the market after putting them to use for a period of 9-10 years. Thus, it cannot be said that dispute of capital goods on transaction value would be covered under the expression “removed as such” so as to attract the reversal of Cenvat credit availed under Rule 3(4)(c) or Rule 3(5) of Cenvat Credit Rules. As decided in Commissioner of Central Excise, Chandigarh v. Raghav Alloys Ltd. [2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT] removal of capital goods on which the Cenvat credit was availed after use on payment of excise duty on transaction value would not attract Rule 3(5) of the Cenvat Credit Rules, 2004. Issues:1. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding payment of excise duty on capital goods sold after use.2. Applicability of the judgment of Punjab & Haryana High Court and Madras High Court in similar cases.3. Conflict between the judgment of the Larger Bench of the Tribunal and other Tribunal judgments on the issue.4. Determination of whether the capital goods were 'removed as such' under Rule 3(5) of the Cenvat Credit Rules.Analysis:1. The appeal concerned the interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004, regarding the payment of excise duty on capital goods sold after use. The Commissioner (Appeals) held that the rule was attracted, requiring the appellant to pay duty equivalent to the Cenvat credit availed. However, the adjudicating authority had previously ruled that since the capital goods were sold after a long period of use, excise duty paid on the transaction value was sufficient, and Rule 3(5) did not apply.2. The appellant argued that the capital goods were sold after almost ten years of use, citing judgments from the Punjab & Haryana High Court and the Madras High Court, which supported their position. These judgments, along with various Tribunal decisions, emphasized that the removal of capital goods after use and payment of excise duty on transaction value did not attract Rule 3(5) of the Cenvat Credit Rules.3. The Department relied on a judgment of the Larger Bench of the Tribunal in a different case, where a contrary view was taken. The Tribunal in the present case analyzed the conflicting views and considered the specific circumstances of the capital goods being sold after a significant period of use, leading to the conclusion that Rule 3(5) did not apply in this scenario.4. The Tribunal examined the meaning of 'removed as such' under Rule 3(5) and determined that it referred to capital goods being removed without being put to use or used for a short duration to evade revenue. Since the capital goods in question were sold after almost a decade of use, they were not considered to be 'removed as such' under the rule. The Tribunal's decision aligned with the rationale provided by the Punjab & Haryana High Court judgment, emphasizing the importance of considering the actual use and depreciation of capital goods before applying Rule 3(5).In conclusion, the Tribunal found merit in the appellant's arguments supported by relevant legal precedents and set aside the Commissioner (Appeals)'s order, ruling in favor of the appellant.