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CX – CENVAT – Removal of used printing cylinders (capital goods) during period April 2012 to September 2013 – law at the material time was very clear and there was no scope for doubt – extended period rightly invoked: CESTAT

2019-TIOL-2243-CESTAT-AHM

IN THE CUSTOMS EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH, AHMEDABAD

Appeal No. E/11400/2018-SM

Arising out of OIA No. AHM-EXCUS-002-APP-348-17-18, Dated: 28.02.2018
Passed by Commissioner (Appeals) Commissioner of Central Excise, Customs and Service Tax-Ahmedabad

Date of Hearing: 11.01.2019
Date of Decision: 11.01.2019

PARIKH PACKAGING PVT LTD

Vs

COMMISSIONER OF CENTRAL EXCISE
AHMEDABAD-I

Appellant Rep by: Shri S J Vyas, Adv.
Respondent Rep by: Shri K J Kinariwala, Asst. Commr. AR

CORAM: Raju, Member (T)

CX – This appeal has been filed by assessee against the order demanding reversal of Cenvat Credit in respect of used printing cylinders sold as scrap – Proviso to Rule 5A prior to 01/04/2012 referred only to clearances of capital goods and the treatment to be given to Cenvat Credit taken in respect of such capital goods – After amendment, with effect vide notfn 18/12-CE w.e.f. 01/04/2012, the Rule 5A was amended and it removed the distinction between capital goods cleared as such or as waste and scrap – Subsequently, vide notfn 12/13-CE (N.T.), the definition was again amended and it specifically prescribed the treatment to be given to capital goods cleared as waste and scrap – The assessee have already reversed the credit based on transaction value – The assessee is only contesting the liability for period upto 01/04/2012 and after 27/09/2013 – It is seen that from 01/04/2012 to 27/09/2013, the law is very clear and even in respect of capital goods cleared as scrap, the assessee is required to reverse the credit as per the said provision – In some of the cylinders, they have not availed the Cenvat Credit – The said claim was, however, not made before the lower authorities – It is apparent, that the provisions of CCR, 2004 would apply only to the capital goods cleared as scrap on which they have availed Cenvat Credit – In respect of others, the said provision may not apply – Thus, the reversal of CENVAT Credit needs to be requantified in such cases – Accordingly, for the period 01/04/2012 to 27/09/2013, the matter is remanded to original Adjudicating Authority to work out to exact liability – In respect of period after 27/09/2013, the law is very clear and capital goods cleared as scrap has to be charged to duty on the basis of the transaction value – The assessee has already discharged the liability and thus the demand cannot sustain for that period – As regard the issue of limitation, the law and the material time was very clear and there was no scope for doubt – In these circumstances, the extended period is rightly been invoked – The appeal is partly allowed and partly remanded – The penalty will be requantified: CESTAT

Appeal partly allowed

FINAL ORDER NO. A/10131/2019

Per: Raju:

This appeal has been filed by Parikh Packaging Pvt. Ltd. against the order demanding reversal of Cenvat Credit in respect of used printing cylinders sold as scrap.

2. Ld. Counsel for the appellant argued that during this period, the law has changed twice. Prior to 01.04.2012, the following provision crystallized the liability on actual goods revoked on which Cenvat credit has been taken:

“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 the percentage points calculated by straight line method as specifi8ed below for each quarter of a year or part thereof from the date of taking the CENVAT Credit.

b. for capital goods, other than computers and computer peripherals @2.5% for each quarter.”

Vide notification No. 18/2012-CE (N.T.) dated 17/03/2012 rule 5A was substituted in the CENVAT credit rules which read as follows:

“(5A) If the capital goods, on which the CENVAT Credit has been taken, are removed after being used, whether as capital goods or as scrap or waste, the manufacturer or provider of output services shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

(a) For computers and computer peripherals

For each quarter in the first year @ 10%
For each quarter in the second year @8%
For each quarter in the third year @ 5%
For each year in the fourth and fifth year @1%

(b) for capital goods, other than computers and computer peripherals @2.5% for each quarter”

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.”

Thereafter, on 27/09/2013, the same was substituted by the following:

“(5A) If the capital goods, on which the CENVAT Credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method specified below for each quarter of a year or part thereof from the date of taking the CENVAT credit, namely:-

(ii)for capital goods, other than computers and computer peripherals @ 2.5% for each quarter:

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

(b)If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.”

2. Ld. Counsel argued that the only reason why Revenue is seeking reversal of CENVAT Credit on the goods, treating the said goods as used capital goods and not as scrap, is that in the invoices of the sale, the goods have been shown in number and not in weight. He argued that the goods have been described as scrap and because they keep the inventory of goods in number, therefore, while selling the number was mentioned. He argued that this cannot be a reason to treat the goods as used capital goods and not as scrap. He further argued that on few of those cylinders, they have not taken credit and, therefore, there cannot be a liability in respect of such cylinders. However, he admitted the liability for period 01/04/2012 to 26/09/2013.

2.1 He further argued that the demand has been issued invoking extended period of limitation. He argued that all these transactions were shown in their records and there cannot be case of suppression of facts.

3. Ld. AR relied on the impugned order.

4. I have gone through rival submissions. I find that proviso to Rule 5A prior to 01/04/2012 referred only to clearances of capital goods and the treatment to be given to the Cenvat Credit taken in respect of such capital goods. After amendment, with effect vide notification 18/12-CE dated 17/03/2012 with effect from 01/04/2012, the Rule 5A was amended and it removed the distinction between capital goods cleared as such or as waste and scrap. Subsequently, vide notification 12/13-CE (N.T.) dated 27/09/2013, the definition was again amended and it specifically prescribed the treatment to be given to capital goods cleared as waste and scrap. The appellant have already reversed the credit based on transaction value. The appellant are only contesting the liability for the period upto 01/04/2012 and after 27/09/2013.

4.1 It is seen that from 01/04/2012 to 27/09/2013, the law is very clear and even in respect of capital goods cleared as scrap, the appellants are required to reverse the credit as per the said provision. In this regard, Ld. Counsel has argued that in some of the cylinders, they have not availed the Cenvat Credit. The said claim was, however, not made before the lower authorities. It is apparent, that the provisions of Central Credit Rules, 2004 would apply only to the capital goods cleared as scrap on which they have availed Cenvat Credit. In respect of others, the said provision may not apply. Thus, the reversal of CENVAT Credit needs to be requantified in such cases. Accordingly, for the period 01/04/2012 to 27/09/2013, the matter is remanded to original Adjudicating Authority to work out to exact liability. In respect of period after 27/09/2013, the law is very clear and capital goods cleared as scrap has to be charged to duty on the basis of the transaction value. The appellant has already discharged the liability and thus the demand cannot sustain for that period.

4.2 As regard the issue of limitation raised by Ld. Counsel, the law and the material time was very clear and there was no scope for doubt. In these circumstances, the extended period is rightly been invoked. The appeal is partly allowed and partly remanded as per the above discussion. The penalty will be requantified in above terms.

(Dictated and pronounced in the open Court)

(Paras are numbered as per the original text: Editor)

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