TaxTMI 
TaxTMI 
2023 (7) TMI 632
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....il 1999. In 2022, those machineries had been transferred from A to the B Unit. 3. On 16.07.2003, a show cause notice came to be issued alleging suppression of value of the capital goods and evasion of Central Excise Duty thereupon. There was an inspection of the factory premises on 26.02.2003 when the officials noted that in arriving at the value of capital goods for the purpose of payment of excise duty, the depreciation computed under the Written Down Value method (WDV method), has been adopted, at 25%, in line with the provision under the Income Tax Act, 1961. 4. The officials were of the view that the straight line method ought to have been adopted as prescribed by the Central Board and Excise and Customs (in short 'CBEC') under Circular No.643/34/2002- CX dated 01.07.2002 (in short '2002 Circular') read with Board's Letter No.495/16/93-CUS IV, dated 26.05.1993 (in short '1993 Board Letter'). This is the narrow controversy before this Court. 5. The book value of the machineries transferred from Unit A to B had been adopted for the purpose of reversal of CENVAT Credit. The officials noted that the original assessable value of the capital goods was a sum of Rs.1,67....
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....e notice was not proper and remanded the matter for recomputation of differential duty. 12. Heard the detailed submissions of Mr.M.Kumar, learned counsel for the appellant and Mr.N.Dilipkumar, learned Panel counsel for the respondents. The following substantial questions of law have been raised: "1) Whether the First Respondent correctly applied the law, for availing the depreciation Under Section 32 of the Income Tax Act incorporated in Rule 4(4) of Cenvat Credit Rules read with Rule 3(4) of Cenvat Credit Rules, in respect of removal of used capital goods as such, during the year 2002-2003 ? 2) Whether the First Respondent erred in directing to apply straight line method of depreciation effective from 13-11-2007 read with amended Rule from 27-2-2010 by Notification No.6/2010-CE(N.T) which was not prescribed during the period of removal of such capital goods (ie.,) Financial year 2002-03 ? 3) Whether the First Respondent's order is retrograde in nature while rejecting the application of Section 32 of the Income Tax Act, 1961, for depreciation used capital goods? 4) Whether the First Respondent Tribunal violated the principles of natural justice in placing the Circulars....
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....ereinafter referred to as the CENVAT credit) of-- ........... (4)When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, the manufacturer of the final products shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods under sub-section (2) of section 3 or section 4 or section 4A of the Act, as the case may be, and such removal shall be made under the cover of an invoice referred to in rule 7." 16. One issue that has arisen in several cases relating to the reversal of credit relates to the understanding of the phrase 'as such' in the above Rule. While the Department contended that the entirety of the credit availed would have to be reversed, it was the contention of the assessees that such total reversal would only arise if the removal of the goods was in 'as such' condition, that is, without having been put to use. 17. Thus, in cases where the goods had been put to use, a deduction was to be given, to provide for their depreciation. The Appellant has referred to the following cases wherein the issue for consideration touched upon the interpretation of the phrase 'as s....
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.... the trade associations about certain doubts still persisting in the minds of the field officers. These points of doubt are being clarified in the Table enclosed. 3. Field formations may be suitably informed. 4. Hindi version will follow 5. Receipt of this Circular may kindly be acknowledged. Sd/- (A.K.PRASAD) DIRECTOR (CX I) 3092812 Clarifications on points of doubt under The New Valuation Provisions introduced w.e.f. 1.7.2000 .... 14. How will valuation be done when inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, under the erstwhile sub rule (1C) of rule 57AB of the Central Excise Rules, 1944, or under rule 3(4) of the Cenvat Credit Rules, 2001 or 2002? Where inputs or capital goods, on which credit has been taken, are removed as such on sale, there should be no problem in ascertaining the transaction value by application of sec.4(1)(a) or the Valuation Rules. [provided tariff values have not been fixed for the inputs or they are not assessed under Section 4A on the basis of MRP] There may be cases where the inputs or capital goods are removed as such to a sister unit of the assessee or to another factory ....
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.... thereof from the date of taking the CENVAT Credit, namely:- (a) for computers and computer peripherals: for each quarter in the first year @10% for each quarter in the second year @8% for each quarter in the third year @5% for each quarter in the fourth and fifth year @1% (b) for capital goods, other than computers and computer peripherals @2.5% for each quarter.] 26. According to the appellant, Rule 4(4) of the CCR 2004 would fully support its claim that the reduction from assessable value should be in line with the provision for depreciation under the Income Tax Act, 1961. In the interests of completion, the above Rule is extracted below: "Conditions for allowing CENVAT credit. 4.(1)............ (4) The CENVAT credit in respect of capital goods shall not be allowed in respect of that part of the value of capital goods which represents the amount of duty on such capital goods, which the manufacturer claims as depreciation under section 32 of the Income-tax Act, 1961 (43 of 1961)." 27. We are not in agreement with the appellant that the above Rule would be applicable in the present case. Rule 4 sets out the preconditions for availment of credit. One of those conditions....