The Mumbai bench of Customs, Excise, and Service Tax Appellate Tribunal presided by Mr. Sanjiv Srivastava, Member (Technical), and Mr. Ajay Sharma, Member (Judicial) has held that Cenvat credit availed on capital goods is allowable when capital goods are removed, either used or not.
The appellant, M/s. Crompton Greaves Ltd. is a registered manufacturer of Electric Motors, Generators, and parts and availing Cenvat Credit facility. During assessment proceedings, the revenue demanded a differential amount of Central Excise duty alleging that the appellant had not shown the original purchase price value of the capital goods cleared during the period from November 2005 to October 2006 in their relevant clearance invoices and ER-1 returns but had cleared the capital goods on a depreciated value without any basis as provided in law for such depreciation. The Commissioner (Appeals) confirmed the demand.
The counsel for the appellant submitted that the scheme of Modvat/ CENVAT credit did not exist in the statute when the appellant purchased the said capital goods in 1976 after payment of excise duty. Thus, there was no occasion for them to take Modvat/ CENVAT credit of the excise duty paid by them as the scheme of MODVAT Credit was introduced in respect of inputs only in 1986 and extended to Capital Goods in the year 1994.
The appellant’s counsel further submitted that they had correctly cleared the said capital goods from their Kanjur factory after reversing/paying excise duty on the said capital goods at their depreciated/written down value. The matter is revenue neutral, as whatever duty that the Appellant may have paid/reversed on the said capital goods was very much available to them by way of Cenvat credit when the said capital goods entered their own factory at Mandideep, Madhya Pradesh.
The Tribunal observed that the capital goods were removed by the appellant after having been put to use for a considerable period of time, the approach adopted by the appellant to reverse the amount determined on the basis of the book value of the capital goods, or depreciated value of capital goods cannot be faulted with.
The division bench while allowing the appeal has held that “we find exercise in the case to be completely revenue neutral as the quantum of duty/ credit reversed will be available as credit to the appellant unit at Mandideep. Since we find that impugned order cannot be sustained on merits, we are not inclined to discuss the issue of revenue neutrality and invocation of the extended period of limitation for making these demands”.
Advocate Mr. Aditya Chitale appeared on behalf of the appellant and Mr. Anuradha Parab appeared on behalf of the respondent.
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