M/S. L.G. Balakrishnan & Bros. Ltd vs Cce, Coimbatore

(Arising out of Order-in-Appeal No. 81/2007 dated 31.10.2007, passed by the Commissioner of Central Excise (Appeals), Coimbatore).

For approval and signature

Honble Shri R. PERIASAMI, Technical Member

M/s. L.G. Balakrishnan & Bros. Ltd. : Appellant

Vs.

CCE, Coimbatore : Respondent

Appearance

Shri R. Srinivasan, Consultant, for the appellant

Shri R. Subramaniyan, AC (AR), for the respondent

CORAM

Honble Shri R. PERIASAMI, Technical Member

Date of Hearing/Decision: 13.03.2015

FINAL ORDER No. 40327 / 2015

The short issue arises in this appeal relates to reversal of capital goods credit availed by the appellants at the time of removal of used capital goods. Appellant availed capital goods credit of Rs.1,82,730/- whereas at the time of removal of the capital goods they have reversed the credit as per the transaction value of Rs.1,48,522/-. Ld. adjudicating authority confirmed the differential credit of Rs. 34,208/- and also imposed equal penalty. On appeal the Commissioner (Appeals) has upheld the order passed by the adjudicating authority. Hence the present appeal.

2. Ld. Consultant for the appellant submits that differential credit has been demanded without allowing the depreciation on the capital goods used by them. If depreciation is allowed, the differential credit comes to Rs. 3,639/- as per the Boards Circular dated 01.07.2002, whereas, they have reversed an amount of Rs. 6168/- along with interest. He relied upon the Larger Bench decision in the case of CCE, Hyderabad Vs. Navodhaya Plastic Industries Ltd.  2013 (298) ELT 541 (Tri.-LB) and Boards Circular No. 643/34/2002-CX dated 01.07.2002.

3. Ld. DR for the Revenue reiterates the findings of the impugned order.

4. Heard both sides and perused the records.

5. The short issue in the present case is reversal of cenvat credit availed on the capital goods. It is seen that the lower authority has demanded differential cenvat credit of Rs. 34,208/- on the capital goods removed after use without allowing the depreciation. I find from the work sheet submitted by the appellant, the original value of capital goods is Rs. 11,42,067/- on 5 machines and credit availed was Rs. 1,82,731/-. However, at the time of clearance of the said capital goods after use, they paid duty of Rs. 1,48,523/- on the transaction value of Rs. 9,28,267/-. The value arrived after allowing depreciation is Rs. 9,51,011/- and the amount payable comes to Rs. 1,52,162/-. Since they have already discharged duty amount of Rs. 1,48,523/- at the time of clearance of the said capital goods, the balance amount payable is only Rs. 3,639/- whereas the appellant already paid an amount of Rs. 6,168/- by way of debit in RG23A. The issue has already been settled by LB of the Tribunal in the case of Navodhaya Plastic Industries Ltd., (supra). The relevant portion of the order is reproduced below:-

8.?During the period when similar provision was in force C.B.E. & C. had issued Circular No. 643/34/2002-CX., dated 1-7-2002 to the effect that credit amount to be reversed will be reduced by 2.5% per quarter of use of the machinery.

9.?After 13-11-2007 the applicable provisions read as under :

With effect from 13-11-2007, the following provision has been introduced in Rule 3(5) ibid.

Provided also that if the capital goods on which Cenvat credit has been taken are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the Cenvat credit taken on the said capital goods reduced by 2.5 per cent for each quarter of a year or part thereof from the date of taking the Cenvat credit.

10.?The use of capital goods is to spread over many years. A decision to the effect that assessees can bring in capital goods, use it for a few days and then remove it without reversal of any Cenvat credit taken is not consistent with the overall scheme of Cenvat credit and can lead to abuse of the scheme. Considering this aspect and the legislative history and the Circular of C.B.E. & C., we are of the view that we should respectfully follow the decision of the Honble Madras High Court in the case of Commissioner of Central Excise, Salem v. Rogini Mills Ltd. (supra) and the reference made to this Larger Bench is answered accordingly.

In view of the above Tribunals LB decision the appellants are eligible for depreciation on the value of capital goods as per Boards Circular dated 01.07.2002. The appellant has already paid the differential credit of Rs.6,168/- by debiting in their RG-23A as per depreciation formula given in the said Boards Circular. Therefore, the differential demand is restricted to Rs. 3,639/-. Since they have paid the differential amount and interest before adjudication, there is justification for waiver of penalty. Accordingly, the demand is restricted to Rs. 3,639/- and the penalty is set aside. Appeal is allowed to that extent.

(Order pronounced and dictated in the open Court)

(R. PERIASAMI) TECHNICAL MEMBER

BB

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