2017 (9) TMI 221

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....ich were used for generating power was transferred by them during 2001 to their sister concern namely M/s. AURO Energy Ltd. (herein after referred to as AURO) without payment of duty, investigation was conducted. On scrutiny of records as well as statements recorded by the department it appeared that the appellants have contravened the provisions of the erstwhile Rule 57AB of Central Excise Rules, 1944. A show cause notice was issued alleging that appellants had sold capital goods on which MODVAT credit had been taken to AURO without payment of duty and contravening the provisions of Rule57AB of Central Excise Rules, 1944 and proposing to demand duty to the tune of Rs. 73,26,529/- along with interest and also for imposing penalties. After a....

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....heet of the company for the relevant year. In the above background, the officers of the department visited the premises in 2002 2003 and appellants were issued show cause notice proposing to demand duty on the various capital goods transferred to AURO on the ground that pursuant to the sale there has been removal of capital goods and thus appellant has contravened the provisions of Rule 57AB(1)(c). Ld. Counsel submitted that removal contemplated under Rule 57AB(1)(c) is physical removal. That on sale of the co-generation plant, there was no physical removal of capital goods and therefore no duty is payable. To canvass this proposition, he relied upon the judgment in the case of J.K. Spinning and Weaving Mills Ltd. and Anr. Vs. Union of Indi....

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....another unit which is an admitted fact. That therefore the demand of duty, interest and the penalties imposed is legal and proper. 4. We have considered the submissions made by both sides. 5. To appreciate the issue under consideration, the relevant provision contained in the erstwhile Rule 57AB of Central Excise Rules, 1944 is reproduced as under:- "Rule 57AB. CENVAT Credit xxxx xxxxx xxxx (b) The CENVAT credit may be utilized for payment of any duty of excise on any final products manufactured by the manufacturer or for payment of duty on inputs or capital goods themselves if such inputs are removed as such or after being partially processed, or such capital goods are removed as such. Explanation When inputs or capital g....

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....as removed as such in terms of the6 provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, when the right to use the said power plant along with the land, building, plant and machinery were leased by the assessee for consideration to another company 2. Whether on such lease the assessee shall have to pay an amount equal to the credit availed in respect of such inputs or capital goods in terms of Rule 3(5) of the Cenvat Credit Rules, 2004, deeming the transfer of the right to use the said power plant comprising the land, building, plant and machinery to another company as removal as such. C.M.A. No. 3421/2008 xxxx xxxxx xxxxxx 3. Whether the power plant and the inputs, capital goods and input services used in the said power pl....

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.... or capital goods on which cenvat credit has been taken are removed as such from the factory, then subject to compliance of other requirements, the credit availed in respect of inputs on capital goods shall be paid. This situation has not arisen in the present case, as no invoice has been issued for removal of the goods from the factory premises and, therefore, the said rule is not applicable to the case of the assessee." 8. The Tribunal in the case of Bilt Industrial Packaging Company Ltd. Vs. Commissioner of Central Excise, Salem 2007 (216) ELT 217 had occasion to consider whether transfer of ownership of a factory as a whole (with all capital goods therein) would amount to physical removal of capital goods so as to recover the credit ....

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....duct. xxx xxxx xxxxx xxxxx 10. In view of the above settled decision, we find that the provisions of Rule 3(5) are not attracted in the present case. The original authority s attempt to distinguish the above findings is not appropriate. He found that these decisions are regarding change of ownership of whole factory whereas here only a part of the factory is transferred. We find such finding as untenable. Further, regarding question of issue of invoice by the appellant for sale and transfer of capital goods and inputs to the new legal entity, we find on perusal of sample invoice that these are not invoices in terms of Rule 11 of Central Excise Rules, 2002. The appellant contended that the goods were identified with value for the purpo....