Custom, Excise & Service Tax Tribunal
Modernova Plastyles Pvt. Ltd vs Commissioner Of Central Excise, Raigad on 17 September, 2008
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI LARGER BENCH APPEAL No. E/3243/06 (Arising out of Order-in-Appeal No. AT/494/RGD/2006 dated 8.8.2006 passed by Commissioner of Central Excise (Appeals), Mumbai-II) For approval and signature: Hon'ble Ms. Jyoti Balasundaram (Vice President) Hon'ble Mr. M.V. Ravindran, Member (Judicial) Hon'ble Mr. K.K. Agarwal, Member (Technical) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the :
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== Modernova Plastyles Pvt. Ltd. Appellant Vs. Commissioner of Central Excise, Raigad Respondent Appearance: Shri Mayur Shroff, Advocate, for appellant Shri A.K. Prasad, Authorised Representative (Jt. CDR), for respondent CORAM: Hon'ble Ms. Jyoti Balasundaram (Vice President) Hon'ble Mr. M.V. Ravindran, Member (Judicial) Hon'ble Mr. K.K. Agarwal, Member (Technical) Date of Hearing: 17.9.2008 Date of Decision: 10.10.2008 ORDER NO................................. Per: Ms. Jyoti Balasundaram, Vice President
We have heard both sides on the issue referred to the Larger Bench, which relates to interpretation of the expression "as such" appearing in Rule 4(5)(a) of the Cenvat Credit Rules, 2004, which reads as under:-
"The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, reconditioning or any other purpose, and it is established from the records, challans or memos or any other document produced by the assessee taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred and eighty days, the manufacturer shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer can take the CENVAT credit again when the inputs or capital goods are received back in his factory."
The same expression is also used in Rule 3(4)(c) of the 2004 Rules and the rule reads as under:-
"When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, the manufacturer of the final products shall, pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in Rule 7."
2. The expression "as such" has to be interpreted as commonly understood, which is in the "original form" and "without any addition, alteration or modification". It does not have any connection with the goods (capital goods) being new/unused or used. In Sarkar's "Words & Phrases of Excise, Customs & Service Tax", the expression "as such" has been defined as "in or by itself alone". It does not distinguish between a new/unused and a used product. In the case of BILT Industrial Packaging Co. Ltd. vs. CCE, Salem 2007 (216) ELT 217, the Tribunal has brought out how, in Rule 57S(2) as it earlier stood, the expressions "without being used" and "after being used" were mentioned, and subsequently these two clauses were merged into one by using the expression "as such" which clearly shows that the expression is intended to cover both capital goods cleared without use and cleared after being put to use. Ever since the inception of the Modvat/Cenvat Scheme, capital goods, whether used or unused, were allowed to be removed from a factory only on payment of duty or on reversal of cenvat credit taken. Initially, used capital goods could be removed after reversing proportionate credit depending upon the period of use, as per Notification 23/94-CE dated 20.5.1994. This system was later changed to charging duty on used capital goods, cleared on the transaction value as per Notification 6/2001-CE dated 1.3.2001 and w.e.f. 13.11.2007 vide Notification 39/2007-CE, the concept of reversal of proportionate credit has been reintroduced. If the expression "as such" is held to cover only unused or new capital goods, manufacturers who wish to remove used capital goods to job workers' premises for testing, repairing, reconditioning etc., would not be able to avail of the facility under Rule 4(5)(a). Further, if the expression "as such" is interpreted to mean new or unused capital goods, then the question of testing, repairing or reconditioning them does not arise and the terms 'testing', 'repairing' and 'reconditioning' would become redundant, and any interpretation which results in rendering any portion of rule or legislation redundant, should be avoided, as held by the apex court in Amrit Paper vs. CCE, Ludhiana 2006 (200) ELT 365 (SC) and Rajesh Kumar Sharma vs. UOI 2007 (209) ELT 3 (SC).
3. The decision of the Tribunal in Cummins India Ltd. vs. CCE, Pune-III 2007 (219) ELT 911, which has been upheld by the Bombay High Court's order dated 23.7.2008 in Central Excise Appeal No.232 of 2007, only deals with the provisions of Rule 3(4)(c) and does not consider the provisions of Rule 4(5)(a) and, therefore, cannot be said to cover the present issue.
4. In the case of Max India Ltd. vs. CCE, Chandigarh 2008 (227) ELT 328, the assessees who are manufacturers of BOPP film, had imported filter stacks and availed modvat credit of countervailing duty and later exported the filter stacks to original seller for repairs after debiting credit originally availed by them at the time of import. Subsequently, they filed a refund claim which was proposed to be rejected on the ground that credit had been rightly reversed in terms of Rule 3(4) of the Cenvat Credit Rules, 2002. The defence of the assessees was that they were not required to reverse the credit, in view of the provisions of Rule 4(5)(a) of the Rules. The refund claim was rejected by the Assistant Commissioner and the rejection was upheld by the Commissioner (Appeals); the assessees filed appeal before the Tribunal which held that, since the capital goods were received back after repair within a period of 180 days, the assessees were entitled to invoke the provisions of Rule 4(5)(a). It was an admitted position that the filter stacks were used in the assessees' factory. By constant use, in the passage of time, they got damaged, necessitating repairs. It is, therefore, clear that when the Tribunal held that the goods in question were covered under Rule 4(5)(a), it held that even used capital goods were covered by the expression "as such" occurring in Rules 3(4)(c) and 4(5)(a).
5. In the light of the above, we answer the question referred to us by holding that reversal of credit availed on capital goods is required when capital goods are removed, whether used or not.
(Pronounced in Court on 10.10.2008) (Ms. Jyoti Balasundaram) Vice President (M.V. Ravindran) Member (Judicial) (K.K. Agarwal) Member (Technical) tvu 1 5