The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) ruled that the Proviso to Rule 3(5) of the Cenvat Credit Rules, 2004 (CCR) cannot be applied retrospectively to capital goods removed prior to 13.11.2007.
A Show Cause Notice was issued alleging short payment of duty on the ground that the Appellant was required to reverse the entire amount of credit availed on the said capital goods under Rule 3(5) of the Cenvat Credit Rules.
Vrinda Bagaria, who appeared for the appellant submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial precedents. She further submits that Rule 3(5) of Cenvat Credit Rules is not applicable to removal of ‘used’ capital goods. She further submits that Rule 3(5) of Cenvat Credit Rules is applicable only when the goods have been removed ‘as such’ i.e. without being put to any use.
It was further submitted that this issue has been considered by various benches of the Tribunal and consistently held that Rule 3(5) of Cenvat Credit Rules is not applicable to removal of ‘used’ capital goods and that there is no requirement to reverse credit on depreciated value on the goods cleared before 13.11.2007 as proviso to Rule 3(5) was inserted with effect from 13.11.2007 and cannot be applied retrospectively to capital goods removed prior to this date.
A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “We find that the findings of the Commissioner is wrong when he held that credit has to be reversed on depreciated value at the time of removal of capital goods as per proviso to Rule 3(5). Further, we find that the said proviso was inserted w.e.f. 13.11.2007 and cannot be applied retrospectively to capital goods removed prior to this date.”
“We are of the opinion that the entire demand is barred by limitation because the revenue could not establish that there was a suppression of facts with intend to evade payment of duty. The period of dispute involved is 2005-2006 to 2007-2008 whereas the show cause notice has been issued on 30.04.2010 which is beyond the statutory period prescribed under the law” the Bench concluded.
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