Custom, Excise & Service Tax Tribunal
C.C.E., Ludhiana vs M/S Khalsa Cotspin (P) Ltd on 24 June, 2010
CUSTOMS EXCISE & SERVICE TAX APPELLATE TRIBUNAL, West Block No.2, R.K.Puram, New Delhi COURT-III SINGLE MEMBER BENCH Date of hearing/decision: 24.6.2010 Central Excise Appeal No.801 of 2008-SM Arising out of the order in appeal No.397/CE/Appl/Ldh/2007 dated 1.1.2008 passed by the Commissioner (Appeals), Customs & Central Excise, Chandigarh. For Approval and Signature: Honble Shri M. Veeraiyan, Technical Member 1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? Yes 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? yes 3 Whether their Lordships wish to see the fair copy of the Order? Seen 4 Whether Order is to be circulated to the Departmental authorities? Yes C.C.E., Ludhiana . Appellants Vs. M/s Khalsa Cotspin (P) Ltd. . Respondent
Appearance:
Shri S.N. Singh, Authorised Departmental Representative (Jt.CDR) for the Revenue and Shri Ravi Chopra, Advocate for the respondents Coram: Honble Shri M. Veeraiyan, Technical Member Oral Order No.____________________ Per M. Veeraiyan:
This is an appeal by the Department against the order of the Commissioner (Appeals) No. 397/CE/Appl/Ldh/2007 dated 1.1.2008 by which the order of the original authority dated 6.2.2007 which was in favour of the party was upheld.
2. Heard both sides.
3. The relevant facts, in brief, are that the respondent was manufacturing polyester yarn and acrylic yarn which were subject to duty. They received capital goods namely, Machinery Draw Frame and took credit of Rs.2,78,284/- in two instalments as provided for. The capital goods were installed and were being used for manufacture of excisable goods. Notification No.30/04 dated 9.7.04 came to be issued and as a result, the final products manufactured by them namely, polyester and acrylic yarn got exempted. The party reversed the credit attributable to inputs lying in stock, inputs in process and inputs contained in final products which were pending clearance. The respondent thereafter sold the machinery on which they had taken the above credit on 1.10.04 for a sum of Rs.17 lakhs. Show cause notice dated 18.12.06 was issued alleging that the party failed to reverse the credit taken by them on the capital goods in terms of Rule 3(5) of Cenvat Credit Rules, 2004. The party contested the show cause notice and the original authority dropped the proceedings taking into account the ratio of the decision of the Tribunal in the case of Madura Coats Ltd. vs. C.C.E., reported in 2005 (190) ELT 450. On appeal by the Department, the Commissioner (Appeals) rejected the appeal of the Department and upheld the order of the original authority.
4.1 Learned Jt.CDR submits that at the time of its removal from the factory, the capital goods were capable of performing the process for which it was used by the party in their factory and it is not the case that the said capital goods had become incapable of being put to use. Therefore, when the capital goods were capable of being put to use in the same manner as it was being used in the factory of the party, the clearance made is to be termed as a clearance of capital goods as such. Therefore, the party is liable to pay an amount equivalent to the credit availed thereon under the provisions of Rule 3(5) of the Rules. Therefore, in these circumstances, the appellate authority has erred in holding that as such means that the capital goods have been removed without putting into use.
4.2 He also submits that the observations of the appellate authority that clearances of the capital goods was effected when the party was working under the exemption Notification No.30/2004-CE dated 9.7.2004 and were not registered with the Central Excise Department are erroneous inasmuch as that the Notification in question provides exemption of payment of duty only to the finished goods covered under the said Notification and not to the impugned capital goods cleared by them.
4.3 He also draws my attention that the decision of the Tribunal in the case of Madura Coats Ltd. is under challenge before the Honble High Court of Madras and he fairly submits that no stay has been granted by the Honble High Court.
5. Learned Advocate for the respondents submits that they have utilised the capital goods for the intended purpose. The final product manufactured by them using the said machinery got subsequently exempted. As they stopped the manufacturing the said final products they sold the capital goods. The decision of the Madura Coats Ltd. has been rightly relied upon by the lower authorities. He also submits that the decision of the Tribunal in the case of Cummins India Ltd. vs. C.C.E., Pune III reported in 2007 (219) ELT 911 which clearly held that goods which have been put to use for some period and removed thereafter cannot be treated as cleared, as such , has been upheld by the Honble High Court of Mumbai in the case of Commissioner vs. Cummins India Ltd. reported in 2009 (234) ELT A 120. Further, he submits that inasmuch the respondents have not suppressed any relevant material from the Department, the demand of duty invoking the extended period of limitation as proposed in the show cause notice cannot be confirmed. This issue becomes relevant only if the view of the Department on merits is accepted.
6. I have carefully considered the submissions from both sides. In the present case, undisputedly, the capital goods have been installed in the premises of the respondents and were put to use. The phrase cleared as such has been interpreted by the Tribunal in the case of Salona Cotspin Ltd. vs. C.C.E., Salem reported in 2006 (201) ELT 592 wherein it has been held that the goods removed after use cannot be treated as cleared as such. Similarly, in the case of Cummins India Ltd., the Tribunal following the decision of the Tribunal in Madura Coats Ltd. has held that the capital goods removed after putting them to use cannot be held as removed as such. This decision stands upheld by the Honble High Court of Mumbai. In view of the above, I do not find any merit in the appeal challenging the concurrent finding of the Commissioner (Appeals) and the original authority which are in favour of the respondents.
7. Incidentally, I find merit in the submission of the learned Advocate that even otherwise, the demand is time barred.
8. The appeal by the Department is rejected.
(M. Veeraiyan) Technical Member scd/ 5