2014 (7) TMI 984 - AT - Central Excise

Tribunal rules on differential duty for used capital goods

The Tribunal partially allowed the Revenue's appeal, ruling that the respondents were liable to pay the differential duty on the depreciated value of the ... Reversal of cenvat credit - capital goods cleared as such to their sister unit - duty paid on the transaction value, which is less than the depreciated value - scope of the term 'as such' - Held that:- there is merit in the Revenue’s appeal and the respondents are liable to pay the differential duty as confirmed by the adjudicating authority on the depreciated value of the used capital goods cleared as such to their sister unit. Levy of penalty - held that:- Revenue has not put forth any valid grounds on the suppression of facts. - penalty waived - demand of duty and interest confirmed - Decided partly in favor of revenue. Issues:- Appeal against order passed by Commissioner (Appeals) regarding clearance of capital goods to sister unit on payment of duty on invoice value instead of depreciated value.- Interpretation of Rule 3(4) of Cenvat Credit Rules, 2002 in relation to used capital goods.- Application of Board's Circular dated 01.07.2002 and CBEC letter dated 26.05.93 on depreciation of capital goods.- Consideration of various tribunal decisions and High Court judgments on the issue.Issue 1: Appeal against Commissioner (Appeals) OrderThe Revenue filed an appeal against the Commissioner (Appeals) order confirming a differential duty on the clearance of capital goods to a sister unit after put into use, on payment of duty on invoice value instead of depreciated value. The Commissioner (Appeals) allowed the appeal of the respondent based on the argument that the capital goods were removed as such from the manufacturer's factory, and hence, duty was payable on the value determined under Section 4 of the Central Excise Act, 1944. This decision was supported by the Tribunal's ruling in the case of Madura Coats Pvt. Ltd. Vs. CCE - 2005 (190) ELT 450 (Tri.).Issue 2: Interpretation of Rule 3(4) of Cenvat Credit Rules, 2002The debate centered on the interpretation of Rule 3(4) of Cenvat Credit Rules, 2002, concerning the clearance of used capital goods. The Revenue contended that the lower appellate authority did not consider the Board's Circular F.No. 643/34/2002-Cx dated 01.07.2002, which specified depreciation rules for capital goods. The argument was supported by referencing various decisions, including those of the Hon'ble High Court of Punjab & Haryana. The respondent argued that Rule 3(4) applied to capital goods cleared as such and not to used cenvated capital goods, citing the case law of CCE, Coimbatore Vs. L.G. Balakrishnan & Bros. - 2009 (238) ELT 659 (Tri. - Chen.).Issue 3: Application of Board's Circular and CBEC Letter on DepreciationThe Tribunal extensively discussed the Board's Circular dated 01.07.2002 and CBEC letter dated 26.05.93 regarding the depreciation of capital goods. The Hon'ble Madras High Court upheld the Tribunal's decision that used capital goods cleared after being put into use should be assessed on the depreciated value, as per the Board's Circular and CBEC letter.Issue 4: Consideration of Tribunal Decisions and High Court JudgmentsMultiple tribunal decisions and High Court judgments were considered in arriving at the final decision. The Tribunal upheld the decision of the Hon'ble Madras High Court regarding the clearance of used capital goods on depreciated value. Additionally, the Larger Bench of the Tribunal emphasized the importance of not allowing abuse of the Cenvat credit scheme and followed the decision of the Hon'ble Madras High Court in Commissioner of Central Excise, Salem Vs. Rogini Mills Ltd.In conclusion, the Tribunal allowed the Revenue's appeal partially, holding that the respondents were liable to pay the differential duty on the depreciated value of the used capital goods cleared to their sister unit. The penalty imposed was waived due to the absence of valid grounds on the suppression of facts.