TaxTMI 
TaxTMI 
2026 (3) TMI 1589
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....s and require customer-specific moulds. The moulds are imported from M/s. Novotema, Italy on payment of applicable customs duties and the appellant availed CENVAT credit of the duties paid thereon treating them as capital goods used in the manufacture of final products. 2. The facts briefly stated are that during audit conducted by the department for the period April 2009 to June 2013, it was noticed that the appellant had raised invoices for sale of moulds to certain customers under Rule 11 of the Central Excise Rules, 2002 and had collected VAT on such invoices. However, the department observed that in several instances the appellant had not reversed the CENVAT credit availed on such moulds at the time of issuing the invoices. According to the department, raising of invoices for sale of moulds amounted to removal of capital goods and therefore the appellant was required to pay an amount equal to the CENVAT credit availed under Rule 3(5) of the CENVAT Credit Rules, 2004. On this basis, a Show Cause Notice dated 06.01.2015 was issued proposing recovery of wrongly availed CENVAT credit amounting to Rs. 21,95,821/- along with interest and penalties under the provisions of the Cent....
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....E - 1995 Supp (1) SCC 50 and CCE v. Dashion Ltd. - 2016 (41) STR 884 (Guj.). It was finally contended that since the demand itself is unsustainable, the question of interest and penalty does not arise. 5. The Ld. AR appearing for the Revenue reiterated the findings contained in the impugned order and submitted that once invoices were raised for sale of moulds and VAT was collected, the transaction amounted to removal of capital goods and therefore the appellant was required to reverse the CENVAT credit under Rule 3(5) of the CENVAT Credit Rules, 2004. 6. After hearing both sides and perusing the records, the following issues arise for consideration: - i. Whether raising invoices for sale of moulds without physical movement of moulds amounts to "removal" of capital goods under Rule 3(5) of the CENVAT Credit Rules, 2004. ii. Whether the appellant is required to reverse the CENVAT credit availed on such moulds. iii. Whether the extended period of limitation has been correctly invoked. iv. Whether the demand of interest and imposition of penalties are sustainable. 7. We now proceed to examine the issues seriatim and record our findings as fo....
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....n of the Tribunal in Polyplastics Industries (I) Pvt Ltd vs CCE - 2016 (332) ELT 895 (Tri.-Del.) which was subsequently affirmed by the Hon'ble Punjab & Haryana High Court. In the said decision, the Tribunal observed as follows: - "5. I find from the available records that upon verification of the documents and after visiting of the factory of the appellant, the Chartered Engineer has certified that the moulds in question are in possession of the appellant and that the said moulds are running in good working condition. The said certificate proves beyond any shadow of doubt that the moulds on which CENVAT credit taken by the appellant had been installed in the factory for use, in or in relation to manufacture of the final product. In view of the fact that the said moulds have not been removed from the factory, the requirements of Rule 3 (5) of the CENVAT Credit Rules will have no application. The said rule provides payment of equal amount of CENVAT credit, when the CENVAT availed inputs or capital goods are removed as such from the factory. Since, moulds, in this case, have not been removed from the factory by the appellant; denial of CENVAT benefit by the authorities below....
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....e CENVAT Credit Rules, 2004. ISSUE (ii) Whether the appellant is required to reverse the CENVAT credit availed on such moulds 18. Having held that the moulds were not removed from the factory, the next question that arises is whether the appellant was nevertheless required to reverse the CENVAT credit availed on such moulds. We note that the moulds were imported by the appellant on payment of customs duty and CENVAT credit of such duties was availed treating them as capital goods used in the manufacture of final products. The eligibility of such moulds as capital goods under Rule 2(a) of the CENVAT Credit Rules has not been disputed. 19. We observe that Rule 3(5) is intended to neutralize credit only when inputs or capital goods are removed as such from the factory without being used in the manufacture of final products. When capital goods remain within the factory and are continuously used in the manufacture of dutiable final products, the credit legitimately taken cannot be denied. 20. We note that the appellant has also submitted that the cost of the moulds was amortised and included in the assessable value of the finished products supplied to customers. Thus, the va....
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....nvolving interpretation of law. 26. We also note the decision of the Hon'ble Gujarat High Court in CCE vs Dashion Ltd. - 2016 (41) STR 884 (Guj.), where it was held that when the department is aware of the relevant facts and the issue is interpretational, the invocation of extended period of limitation is not justified. 27. We therefore find that the department has not produced any evidence to establish suppression of facts or intention to evade payment of duty on the part of the appellant. Accordingly, we hold that invocation of the extended period of limitation in the present case is not sustainable. Issue No. (iv): Whether the demand of interest and imposition of penalties are sustainable 28. We now examine whether the interest and penalties imposed in the impugned order are sustainable. We observe that interest under Section 11AA/11AB of the Central Excise Act is merely consequential to the duty liability. Once the demand of duty itself is held to be unsustainable, the question of recovery of interest does not arise. We further note that penalty under Section 11AC of the Central Excise Act can be imposed only when the duty short payment is attributable to fraud, sup....