2024 (8) TMI 473

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....nd Rule 3 (5A) of Cenvat Credit Rule 2004 effective from 17.03.2012 stipulates that the if the capital goods on which cenvat credit has been taken are removed after being used, the manufacturer shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by specified percentage for each quarter of a year or part thereof from the date of taking the Cenvat credit. The relevant provisions read as below: - (ii) The provisions of third proviso to Rule 3(5) of Cenvat Credit Rules, 2004 as its existed upto 16.03.2012 read as under: (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output services, as the case may be, shall pay and amount equal to the credit avalled in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9; Provided that such payment shall not be required to be made where any inputs [ or capital goods) are removed outside the premises of the provider of output service for providing the output service: ....

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....oducts provider of output service in such subsequent years) 2. As per the above rules, the Cenvat credit of duty paid on capital goods is to be taken in two different financial years unless the same capital goods are cleared as such in the same financial year. If the capital goods are cleared after use in the factory, in terms of Rule 3 (5) / 3 (5 A), an amount equal to Cenvat credit has to be paid prior to 16.03.2012. Rule 3(5A) which was introduced w.e.f. 17.03.2012 provides that the amount of Cenvat credit availed shall be reduced by 2.5% per quarter of the year or part thereof as depreciation for calculation of the amount that has to be reversed when used capital goods are removed. According to department, the appellant had arrived the amount to be reversed / payable on removal of used capital goods by reducing 2.5% per quarter from the date of receiving the capital goods in the factory. The appellant thus arrived at the amount to be reversed by adopting the depreciation per quarter on the entire 100% of the amount from the initial date of credit availment. The appellant had availed only 50% credit in the first financial year and balance 50% was availed in the subsequent fin....

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....bsp; First 50% Second 50% Date of taking the credit 22.11.2008 21.04.2009 Machinery usage period No of quarter No of quarter November 2008 and December 2008 0.5 0 January 2009 to March 2010 1 0 April 2010 to December 2010 3 3 January 2010 to December 2010 4 4 January 2011 to December 2011 4 4 January 2012 to March 2012 1 1 April 2012 to June 2012 1 1 July 2012 and August 2012 0.5 1 Total usage period 15 14 Allowable Reduction as per quarter as per Rule 3 (5)/(5A) of CCR 2004 2.5% 2.5%   37.5% 35 Credit taken amount 2,03,466 2,03,466 Less: Allowable deduction 76,300 71,213 Balance Duty payable 1,27,166 1,32,253 Total Duty payable   2,59,419 Workings for differential duty payable Duty paid by LMW 2,54,333 Duty payable as per department workings 2,59,419 Difference duty payable -5,087 From the above table, it is evident that the difference in duty relates to the deductible percentage for the second 50%. The department has worked out 35% (for the second 50%) as against the allowable deduction of ....

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....udit conducted. The entire figures have been taken from the accounts maintained by the appellant. The appellant has already paid the duty amount calculated by applying the deduction from the initial date of availing the credit. Show cause notice has been issued, and on the ground of the difference in the method of calculation in arriving at the amount to be paid when used capital goods are removed from the factory. The issue being purely interpretational, the invocation of extended period may be set aside. The Ld. Consultant prayed that the appeal may be allowed. 10. The Ld. AR Shri. Anoop Singh appeared and argued for the department. It is submitted that both Rule 3 (5) as well as Rule 3 (5A) of CCR 2004 are very clear that the relevant date for computation of depreciation for payment of an amount equal to the Cenvat credit availed on capital goods removed from factory after being put into use, is the date of taking the Cenvat credit. The show cause notice has clearly mentioned these provisions as well as Rule 4 (2) of CCR 2004. Rule 4 (2) provides that the Cenvat credit for capital goods received in the factory shall be taken only for an amount not exceeding 50% in the same fi....

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.... legal and proper. It is prayed that the appeal may be dismissed. 13. Heard both sides. 14. The issue to be decided is whether the amount arrived at by the appellant for clearances of capital goods on which credit was availed is correct or whether the demand of differential duty alleging that the appellant has to apply 2.5% deduction only on 50% of the credit availed from the date of availing credit is legal and proper? The relevant provisions under Rule 3 (5) and Rule 3 (5A) and Rule 4(2) have been already reproduced above. 15. Rule 4(2) provides that an assessee can avail Cenvat credit of duty paid on capital goods only on 50% in the first financial year. If the capital goods are cleared after use in the factory, in terms of Rule 3(5) / 3(5A), an amount equal to the Cenvat credit availed as reduced by specified percentage is payable by the assessee. The entire controversy revolves around the date from which the deduction of 2.5% has to be applied. The appellant is of the view that since 2.5% deduction is allowed by way of depreciation for the used capital goods, they are eligible for deduction of 2.5% from the date on which the initial credit was availed. Thus, they have....

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....er of Central Excise & ST, Nashik - 2019 (2) TMI 755 (Cestat - Mumbai) dated 29.01.2019, the facts of the case are not so clear as to whether the issue considered is the same. 19. The Ld. Consultant has argued on the ground of limitation. It is submitted that the capital goods having been removed to appellant's own unit, even if the appellant pays duty, the other unit of the appellant would be eligible for credit and situation is entirely revenue neutral. To support this contention the Ld. Consultant has relied upon the decision in the case of Anglo French Textiles Vs. CCE, Puducherry 2018 (360) ELT 1060 (Tri. Chennai) which has been affirmed by the Hon'ble Apex Court as reported in 2018 (360) ELT A 301 (S.C.). 20. The issue is purely interpretational in nature. The question underlying is whether the appellant is eligible to avail 2.5% deduction from the date of availing the credit or from the date of use of the capital goods in the factory. The duty payable on removal of capital goods has always been under controversy. An almost similar issue was referred to the Larger Bench in the case Novodhaya Plastic Industry Ltd., (supra). The meaning of the word "removal of capital goo....