Customs, Excise and Gold Tribunal - Delhi
Eicher Tractors vs Commissioner Of Central Excise on 26 September, 2005
Equivalent citations: 2001(76)ECC604, 2005(189)ELT131(TRI-DEL)
ORDER M.V. Ravindran, Member (J)
1. In view of the conflicting decision on the issue in respect of the correct valuation of the capital goods and the Inputs on which Cenvat credit has been availed when removed as such, the issue has been referred to the Larger Bench.
2. The appellants availed the Cenvat credit on the inputs purchased by them for use in their final products. They removed the inputs by reversing the credit availed on such inputs when removed from their factory.
3. The contention of the appellants is that they are engaged in the manufacture of IC engines and they purchase the duty paid inputs for use in their final products and avail credit of the duty paid on such inputs as provided under the Cenvat Credit Rules, and at times remove such duty paid inputs from the factory to their marketing division by reversing the credit taken on such inputs. The Revenue objected the reversal of the credit on such inputs on the ground that as per Rule 3(4) of the Cenvat Credit Rules, on the removal of the inputs the manufacturer shall pay an amount equal to the duty of excise which is leviable on such goods at the rate applicable to such goods on the date of removal and on the value determined for such goods under Section 4 of the Central Excise Act. There is no dispute about the rate of the duty applied but the dispute is limited to the value of the inputs removed by the appellants. The Revenue seeks to levy the duty on the transaction value at the time of removal.
4. The learned Counsel appearing for the appellants submits that the very same issue was in dispute when the new Cenvat Credit Rules were introduced and the Board gave a clarification vide its Circular No. 6/39/2000-CX.-I, dated 1-7-2002 which at Point No. 14 reads as under :
Sl. No. Point of doubt Clarification
14. How will valuation be Where inputs or capital goods, on which
done when inputs or credit has been taken, are removed as
capital goods; on such on sale, there should be no problem
which Cenvat credit in ascertaining the transaction value by
has been taken, are application of Section 4(1 )(a) or the
removed as such from Valuation Rules. [Provided tariff values
the factory, under the have not been fixed for the inputs or they
erstwhile Sub-rule (1C) are not assessed under Section 4A on the
of Rule 57AB of the basis of MRP].
Central Excise There may be cases where the inputs
Rules, 1944, or under or capital goods are removed as such to a
Rule 3(4) of the sister unit of the assessee or to
Cenvat Credit Rules, another fac-tory of the same company and
2001 or 2002? where no sale is involved. It may be
noticed that Sub-rule (1C) of Rule 57AB
of the erstwhile Central Excise Rules,
1944 and Rule 3(4) of the Cenvat Credit
Rules, 2001 (now 2002), talk of
determination of value for "such goods"
and not "said goods". Thus, if the
assessee partly sells the inputs to
independent buyers and partly
transfers to its sister units, the
ansaction value of "such goods" would be
available in the form of the transaction
value of inputs sold to an unrelated buyer
(if the sale price to the unrelated buyer
varies over a period of time, the value
near to the time of removal should be
adopted). Problems will, however, arise
where assessee does not sell the in-
puts/capital goods to any independent
buyer and the only removal of such in-
put/capital goods, outside the factory, is
in the nature of transfer to a sister unit.
In such a case proviso to Rule 9 will apply
and provisions of Rule 8 of the valuation
rules would have to be invoked. How-
ever, this would require determination of
the 'cost of production or manufacture',
which would not be possible since the
said inputs /capital goods have been re-
ceived by the assessee from outside and
have not been produced or manufac-
tured in his factory. Recourse will, there-
fore, have to be taken to the residuary
Rule 11 of the valuation rules and the
value determined using reasonable
means consistent with the principles and
general provisions of the valuation Rules
and Sub-section (1) of Section 4 of the
Act. In that case, it would be reasonable
to adopt the value shown in the invoice
on the basis of which Cenvat credit was
taken by the assessee in the first place.
In respect of capital goods adequate
depre-ciation may be given as per the
rates fixed in letter F.No. 95/16/93-Cus.
-IV dated 26-5-1993, issued on the
Customs side.
The learned advocate points out that there was one more circular on this specific point vide Circular No. 813/10/2005, dated 25-4-2005 which at Para No. 2 and the table reads as under :
"I am directed to refer to Board's letter No. 6/39/2000-CX. I, dated 1-7-2002 [2002 (143) E.L.T. T39] clarifying certain points relating to the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.
2. A number of references seeking further clarification on some of the points clarified in the Circular mentioned in Para 1 above have been received in the Board. These points are being clarified in the table enclosed. These clarifications supersede the clarification given in above referred circular.
3. Trade Notices may be issued for the benefit of the Trade.
4. Hindi version will follow.
5. Receipt of this circular may kindly be acknowledged.
Sl. No. Old Point of Doubt Clarification
Sl. No.
1. 13. How will valuation of sam In case of free samples,
ples be done which are dis- the value should be
tributed free, as part of mar- determined under Rule
keting strategy, or as gifts or 4 of Central Excise
donations? Valuation (Determina-
tion of Price of Excis-
able Goods) Rules,
2000.
2. 14. How will valuation be done In such situations, the
when inputs or capital goods, provisions of Rule 3(5)
on which Cenvat credit has of Cenvat Credit Rules,
been taken, are removed as 2004 would apply.
such from the factory, under
the erstwhile Sub-Rule (1C) of
Rule 57AB of the Central Ex-
cise Rules, 1944 or under Rule
3(4) of the Cenvat Credit
Rules, 2001 or 2002?
He submits that the issue is covered in their favour in view of the circular dated 25-4-2005.
5. The learned SDK submits that the said circular dated 25-4-2005 was not giving correct picture hence the Board thought it fit to issue further clarification vide circular dated ... which reads as under :
"I am directed to refer to Board's Circulars No. 643/34/2002-CX., dated 1-7-2002 [2002 (143) E.L.T. T39] and No. 813/10/2005-CX., dated 25th April, 2005 [2005 (183) E.L.T. T3] in which clarification was issued on valuation in certain situations, inter alia in respect of valuation of capital goods or inputs removed as such from the factory of the manufacturer. It was clarified that in such situations, the provisions of Rule 3(5) of Cenvat Credit Rules, 2004 shall apply.
2. Consequent to that, a point has been raised as to whether the provisions of Rule 3(5) of Cenvat Credit Rules, 2004 shall apply to situations when the provisions of Sub-rule (1C) of Rule 57AB of Central Excise Rules, 1944, or Rule 3(4) of Cenvat Credit Rubs, 2001 or Rule 3(4) of Cenvat Credit Rules, 2002 were in force.
3. The matter has been examined. As per Sub-rule (1C) of Rule 57AB of Central Excise Rules, 1944, or Rule 3(4) of Cenvat Credit Rules, 2001 or Rule 3(4) of Cenvat Credit Rules, 2002 up to 28-2-2003, in case a manufacturer removes inputs or capital goods as such, he was required to pay an amount equal to the duty of excise leviable on such goods at the rate applicable on the date of such removal and on the value determined under Section 4 or Section 4A, as the case may be. As per Notification No. 13/2003-CE. (N.T.) dated 1-3-2003 Rule 3(4) of Cenvat Credit Rules, 2002 was amended to provide that in such situations, the manufacturer shall pay an amount equal to the credit availed in respect of such inputs or capital goods. This position remains unchanged in Rule 3(5) of Cenvat Credit Rules, 2004.
4. It was in this context that the clarification was issued vide Circular No. 813/10/2005-CX., dated 25th April, 2005 to say that in case, the inputs or capital goods are removed as such, the provisions of Rule 3(5) of Cenvat Credit Rules, 2004 shall be applicable. The situation prior to 1-3-2003 [when Rule 57AB(1C) of Central Excise Rules, 1944, or Rule 3(4) of Cenvat Credit Rules, 2001 or unamended Rule 3(4) of Cenvat Credit Rules, 2002 was in force] shall continue to be governed by the provisions as in force at the relevant time.
5. Trade and field formations may be informed suitably".
He submits that in view of the clarification the revenue was right in demanding the duty on the Transaction Value of the inputs cleared as such.
6. It is seen that the Board vide its circular dated 25-4-2005 has" categorically said that clarifications given in this Circular supersede the earlier Circular dated 1-7-2002 . The revenue cannot argue against its own Circular, when the Board has stated that the provisions of the Rule 3(5) of the Cenvat Credit Rules, 2004 would apply in respect of the capital goods and inputs on which credit has been availed are removed as such. We may reproduce the said Rule 3(5) of the Cenvat Credit Rules, 2004 which reads as under :
"3(5) When inputs or capital goods, on which Cenvat credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, 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 9".
7. In view of the said clarification and the provisions of Rule 3(5) of the Cenvat Credit Rules, 2004, we hold that the reference has to be answered in favour of the appellants. Since no other issue arises in the said matter, the appeal is allowed.
(Operative part of this order was pronounced in the open Court on 26-9-2005)