CEA No. 104 of 2009 [ 1 ] IN THE HIGH COURT OF PUNJAB & HARYANA, CHANDIGARH CEA No. 104 of 2009 Date of Decision: April 20,2010 Commissioner Central Excise Commissionerate, Chandigarh ............................................................... Appellant Versus M/s Raghav Alloys Ltd., Sirhind .......................... Respondents Coram: Hon'ble Mr.Justice Ashutosh Mohunta Hon'ble Mr. Justice Mehinder Singh Sullar Present: Mr. Sukhdev Sharma, Sr. Standing counsel. for the appellant. Mr. Jagmohan Bansal, Advocate for the respondents. ... ASHUTOSH MOHUNTA, J. 1. The Revenue has impugned the order (Annexure A-4) passed by Customs, Excise and Service Tax Appellate Tribunal (for short “the Tribunal”) vide which the Appeal filed by Department was dismissed and it was held that the Respondent has paid correct amount of duty. 2. The Respondent is engaged in the manufacture of Non-Alloy Steel Ingots. The Respondent in the year of 1994 purchased an Induction Furnace and took credit of Rs. 1.30 Lac i.e. equal to duty paid on the said Induction Furnace. The Respondent used the said machinery till 2003 and sold the same in May’ 2003 after payment of duty of Rs. 32,000/- i.e. 16% on the sale price Rs. 2,00,000/-. The Respondent CEA No. 104 of 2009 [ 2 ] paid duty on the transaction but the Revenue formed an opinion that Respondent should pay duty equal to Cenvat Credit availed at the time of purchase of the machinery. On the basis of this opinion, the Revenue issued a Show Cause Notice raising the demand of differential amount of credit i.e. Rs. 98,000/-. The Revenue also sought to impose penalty in the said Show Cause Notice. 3. The Adjudicating Authority i.e. Deputy Commissioner confirmed the demand and further imposed equal amount of duty under Section 11AC/Rule 13 of the Rules. The Respondent preferred an Appeal before the Commissioner (Appeals) and Commissioner (Appeals) relying upon Board Circular dated 01.07.2002 allowed Appeal of the Respondent. The Revenue preferred an Appeal before the Tribunal and the Tribunal ex-parte allowed Appeal of the Revenue. The Respondent-Assessee approached this Court and this Court vide Order dated 19.08.2008 set aside Tribunals’ Order and directed the Tribunal to decide Appeal afresh after hearing the Respondent. 4. The Tribunal vide its Final Order dated 23.04.2009 has dismissed Appeal of the Revenue holding that the Respondent has paid correct amount of duty. The Tribunal has relied upon its earlier judgment in the case of Cummins India Limited vs. CCE, Pune-III, 2007 (219) ELT 911 (Tri.-Mumbai), which has been upheld by Bombay High Court. The Tribunal has also relied upon another earlier decision in the case of CCE, Ludhiana vs. Nahar Fibres, 2007 (220) ELT 855. The Revenue has filed an Appeal against this order of the Tribunal. CEA No. 104 of 2009 [ 3 ] 5. The Revenue has sought to raise following Questions of law: I Whether the expression ‘capital goods cleared as such’ includes capital goods cleared as such after being used in terms of Rule 3 (4) of the Cenvat Credit Rules, 2002? II Whether a two member bench of Tribunal could have adopted an interpretation of the phrase “as such” which is different from the interpretation given by a Larger Bench of the Tribunal in the case of Modernova Plastyles Private Limited vs. CCE, Raigad reported as 2002 (232) ELT 29 (LB)? 6. The Ld. Counsel for the Revenue contended that the Tribunal has wrongly distinguished decision of the Lager bench of the Tribunal in the case of Modernova Plastyles Private Limited vs. CCE, Raigad reported as 2002 (232) ELT 29 (LB) wherein the Tribunal has held that expression as such has to be interpreted as commonly understood, which is in the “original form” and “without any additional alterations or modifications”. 7. Per contra, Counsel of the Respondent contended that in para 3 of the judgment of Larger Bench of the Tribunal, it has been noted that the decision of Tribunal in the case of Cummins India Limited, which has been upheld by Bombay High Court deals with provisions of Rule 3 (4) (c) and does not consider the provisions of Rule 4 (5) (a). The Larger Bench of the Tribunal has considered the provisions of Rule 4 (5) (a) and not Rule 3 (4) (c) whereas the present case is with respect to Rule 3 (4) of the Rules. So the case of Respondent is scarcely covered with the earlier decision of the Tribunal, which has been upheld by the Bombay High Court. CEA No. 104 of 2009 [ 4 ] 8. We have heard arguments of both the Ld. Counsel. The Tribunal has rightly noted that unlike inputs, which get consumed 100% with the same are taken up for use in relation to manufacture of finished goods, capital goods are used over a period of time. The capital goods loose their identity as capital goods only when after use over a period of time, the same has become in-serviceable and fit to be scrapped. The object of Cenvat Credit on capital goods is to avoid the cascading effect of duty. If even after use for a couple of years, the Cenvat Credit is required to be reversed then it would certainly defeat the object of the scheme. To avoid misuse of the scheme in the Rules, it has been provided that if the machines are cleared as such the Assessee shall be liable to pay duty equal to amount of Cenvat Credit availed. The machines which are cleared after utilization cannot be treated as machines cleared as such. With effect from 13.11.2007, a proviso has been added to Rule 3 (5) of the Cenvat Credit Rules providing that if the capital goods on which Cenvat credit has been taken are removed after being used, the manufacturer shall pay the amount equal to Cenvat Credit taken on the said capital goods reduced by 2.5% for each quarter of year or part thereof from the date of taking the Cenvat Credit. The Board has also in the Circular dated 01.07.2002 clarified that in the case of clearance of goods after being put into use, the value shall be determined after allowing the benefit to depreciation as per rates fixed in Boards’ Letter dated 26.05.1993. The Respondent has utilized the machinery for nine years and paid duty on transaction value. The machine cleared after putting into use for nine years cannot be treated as Cleared ‘as such’. Insertion of CEA No. 104 of 2009 [ 5 ] proviso w.e.f. 13.11.2007 makes it clear that there is difference between machines cleared without putting into use and cleared after use. The Bombay High Court has upheld the view of the Tribunal in the case of Cummins India Limited Vs. CCE, Pune-III, 2007 (219) ELT 911 (Tri. – Mumbai). The Tribunal in the case of Nahar Fibres has also dismissed Appeal of the Revenue and there is nothing to show that the said decision of the Tribunal has been set aside by any Court. In these circumstances, we are of the considered opinion that the Appeal of the Revenue is bereft of merits so deserves to be dismissed. The questions raised by Revenue are answered in favour of Assessee and Appeal is dismissed. ( ASHUTOSH MOHUNTA ) JUDGE 20.4.2010 ( MEHINDER SINGH SULLAR ) Rupi JUDGE