2015 (10) TMI 1335 - AT - Central Excise

CESTAT Chennai: Appellants win case on capital goods credit reversal.

M/s L.G. Balakrishnan & Bros Ltd Versus Commissioner of Central Excise, Coimbatore

The Appellate Tribunal CESTAT Chennai ruled in favor of the appellants in a case concerning the reversal of capital goods credit availed upon removal of ... Reversal of CENVAT Credit - Capital goods - Held that:- Since Assessee have already discharged duty at the time of clearance of the said capital goods, the balance amount payable is only ₹ 3,639/- whereas the appellant already paid an amount of ₹ 6,168/- by way of debit in RG23A. The issue has already been settled by LB of the Tribunal in the case of Navodhaya Plastic Industries Ltd., (2013 (12) TMI 82 - CESTAT CHENNAI ). - The appellant has already paid the differential credit of ₹ 6,168/- by debiting in their RG-23A as per depreciation formula given in the said Board's Circular. Therefore, the differential demand is restricted to ₹ 3,639/-. Since they have paid the differential amount and interest before adjudication, there is justification for waiver of penalty. Accordingly, the demand is restricted to ₹ 3,639/- and the penalty is set aside - Decided partly in favour of assessee. Issues:Reversal of capital goods credit availed by the appellants at the time of removal of used capital goods, differential credit demanded without allowing depreciation, applicability of Board's Circular dated 01.07.2002, imposition of penalty.Analysis:The appeal before the Appellate Tribunal CESTAT Chennai involved the reversal of capital goods credit availed by the appellants upon the removal of used capital goods. The appellants had initially availed a credit of Rs. 1,82,730 but reversed it at a transaction value of Rs. 1,48,522. The adjudicating authority confirmed a differential credit of Rs. 34,208 and imposed a penalty, a decision upheld by the Commissioner (Appeals), leading to the present appeal.In the case, the appellant contended that the demand for the differential credit did not consider allowing depreciation on the capital goods used. They argued that as per the Board's Circular dated 01.07.2002, the differential credit should amount to Rs. 3,639, contrary to the demanded amount. The appellant cited the Larger Bench decision in CCE, Hyderabad Vs. Navodhaya Plastic Industries Ltd. to support their stance.Upon hearing both sides and examining the records, the Tribunal focused on the issue of reversal of cenvat credit on the capital goods. The Tribunal noted that the lower authority demanded a differential credit of Rs. 34,208 without factoring in depreciation. After reviewing the work sheet submitted by the appellant, it was found that the original value of the capital goods was Rs. 11,42,067, with a credit availed of Rs. 1,82,731. However, upon clearance of the capital goods after use, duty was paid on a transaction value of Rs. 9,28,267. Considering depreciation, the payable amount was calculated to be Rs. 1,52,162, with the appellant having already paid Rs. 1,48,523 at the time of clearance.The Tribunal referred to the Tribunal's LB decision in Navodhaya Plastic Industries Ltd., which emphasized the reduction of credit amount by 2.5% per quarter of use of the machinery. In line with this decision and the Board's Circular dated 01.07.2002, the Tribunal determined that the appellants were eligible for depreciation on the value of capital goods. Consequently, the differential demand was restricted to Rs. 3,639, as the appellant had already paid Rs. 6,168 in accordance with the depreciation formula. Given the payment of the differential amount and interest before adjudication, the Tribunal justified the waiver of the penalty, ultimately allowing the appeal to that extent.