Custom, Excise & Service Tax Tribunal
Cce, Madurai vs M/S. Ggn Spinning Mills P. Ltd on 18 January, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No. E/739/2004
(Arising out of Order-in-Appeal No. 58/2004 dated 26.2.2004 passed by the Commissioner of Central Excise (Appeals), Madurai)
CCE, Madurai Appellant
Vs.
M/s. GGN Spinning Mills P. Ltd. Respondents
Appearance Ms. Indira Sisupal, JDR for the Appellant Shri M. Kannan, Advocate for the Respondents CORAM Honble Dr. Chittaranjan Satapathy, Technical Member Date of Hearing: 18.01.2011 Date of Decision: 18.01.2011 Final Order No. ____________ Heard both sides.
2. Ms. Indira Sisupal, learned JDR appearing for the Department states that the respondents removed capital goods on which they had availed CENVAT credit to their sister unit. According to the rules in force at the material time, they were required to pay duty on the value of the capital goods. The respondents, according to her, have calculated depreciated value applying depreciation at the rate of 25% as provided under the Income Tax Act and have therefore paid less amount of duty than they would have paid. She states that the depreciated value of the goods were required to be done in accordance with Boards Circular No. 643/34/2002-CX dated 1.7.2002 (Sl. No. 14 to the Table annexed to the circular) read with Circular F. No. 495/ 16/93-Cus. VI dated 26.5.1993 referred to therein. She states that these circulars provide for a depreciation of 4% for every quarter in the first year, 3% for every quarter during the second year, 2.5% for every quarter during the third year and 2% for every quarter thereafter subject to an over all limit of 70%. She states that the Income Tax provisions are not applicable to Central Excise cases and by applying Income Tax provisions the respondents have short-paid a duty amount of Rs.6,89,987/- which was rightly demanded by the original authority but has been set aside wrongly by the lower appellate authority.
3. Heard Shri M. Kannan, learned Advocate for the respondents who supports the impugned Order-in-Appeal on the ground of revenue neutrality. He states that had the respondents paid more duty as demanded by the Central Excise Department, their sister unit would have availed off more credit the very next day. He also places reliance on the decision of the Honble Gujarat High Court in the case of CCE, Vadodara II Vs. Indeos ABS Limited 2010 (254) ELT 628 (Guj.) and CCE, jamshedpur Vs. Jamshedpur Beverages 2007 (214) ELT 321 (SC) for his argument on revenue neutrality.
4. I have considered the submissions from both sides. The cited decisions of the Honble Gujarat High Court and the Honble Supreme Court relate to different fact situations. The decision of the Honble Gujarat High Court relates to goods manufactured by the respondents therein whereas the decision of the Honble Supreme Court relates to a case where the assessee has paid duty equal to the credit amount. In the present case the dispute relates to duty required to be paid on the depreciated capital goods cleared to the sister concern of the respondents. I find that the Board has issued a circular clarifying how the depreciation is to be worked out for computing the value of used capital goods in this case and the circular is being uniformly followed by all assessees subject to excise control. There is no particular reason why the respondents herein have to be treated differently. The lower appellate authority has clearly erred in allowing depreciation as admissible under the Income Tax law when a uniform and unambiguous procedure has been laid down by the Central Board of Excise and Customs to be followed by all assessees subject to excise law. Moreover, I find that the plea of revenue neutrality is not valid. Under the CENVAT Credit Rules, the sister concern was only allowed to take credit of 50% of the duty in the first year and not the credit of the entire amount of duty immediately as pleaded by the learned counsel. Therefore, to waive the requirement to pay additional duty would amount to allowing financial accommodation to the respondents and their sister concern which is not warranted.
5. However, I observe that the calculation of the depreciation adopted in the Annexure to the show-cause notice does not apply a straight line method which has resulted in higher demand against the respondents. That the depreciation for customs and excise purposes has to be calculated as per straight line method applying a lower prescribed percentage fixed for subsequent years as evident from a subsequent circular F. No. 314/19/94-FTT dated 21.4.1998 issued by the Board. As such, while setting aside the impugned Order-in-Appeal, I allow the Departmental appeal by way of remand to the original authority for re-calculation of the differential duty amount applying a straight line depreciation method as prescribed in the Boards circulars cited above. The respondents shall be allowed an adequate opportunity of hearing before passing a fresh order.
(Pronounced in open court) (Dr. Chittaranjan Satapathy) Technical Member Rex ??
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2Appeal No.E/739/2004