Used capital goods cleared by DTA unit to EHTP under CT 3 certificates without reversing credit - Demand on ground that CT 3 clearance is allowed only if goods are obtained directly from manufacturer - HC answers question of law in favour of assessee
By TIOL News Service
BANGALORE, SEPT 24, 2014: THE assessee has a DTA unit and also an EHTP unit. The assessee cleared used capital goods and inputs from the DTA unit to the EHTP unit on the strength of CT 3 certificates by availing the benefit of Notification No 22/2003 CE. It is the case of revenue that the DTA unit is not entitled for the benefit of above notification as the goods were not directly cleared by the manufacturer. In earlier round of litigation, the High Court held in favour of the assessee, but on revenue appeal, the matter has been remanded by the Supreme Court in 2014-TIOL-22-SC- CX to consider the issue in the light of Lakshmi Automatic Loom Works Ltd., vs. Commissioner of Central Excise, Trichy 2008-TIOL-1905-CESTAT-MAD-LB
Before the High Court, revenue contended that, as the assessee has not received the excisable goods directly from the factory of manufacture or warehouse, the condition stipulated in the Notification No.22/2003 is not fulfilled. In the instant case, the assessee has imported the impugned capital goods on which Cenvat credit has been availed and cleared without payment of duty to EHTP under the cover of CT-3 and therefore, the impugned order passed by the Tribunal is not legal and requires to be set aside.
The High Court held:
The decision of Larger Bench of the Tribunal in Lakshmi Automatic Loom Works Ltd ., deals with only reversal of input as such and not removal of used capital goods. In the instant case, the assessee is having Domestic Tariff Area (DTA) Unit in the ground floor. It is having Electronic Hardware Technology Parks (EHTP) Unit in the first floor. The assessee while purchasing the capital goods as well as inputs to its DTA unit has paid duty. Therefore, it has availed Cenvat credit. In so far as the capital goods are concerned, it was used by the assessee in DTA unit. Thereafter, with the permission of the authorities in terms of the Rules 11 and 20 of the Central Excise Rules 2002 and Clause (6) of the Notification No.22/2003, the assessee removed the said goods from DTA unit to EHTP unit. As the said removal of used capital goods was done before the amendment to Rule 3(4 )( 5) of the Cenvat Credit Rules 2004 during November 2007, no credit was reversible on removal of used capital goods and as such they were not liable to pay duty.
In so far as the inputs are concerned, with the permission of the authorities as reflected in Form CT-3 they were also removed to EHTP unit. The assessee had purchased those inputs for its DTA unit. The argument is that the assessee is entitled to the said benefit only if the user industry brings excisable goods directly from the factory of manufacture or warehouse. In the instant case, when it removed goods to EHTP unit, it was not bringing excisable goods directly from the factory of manufacture or warehouse and therefore they are not entitled to the benefit of Notification No.22/2003. This is not a case where the assessee was purchasing those goods for its EHTP unit for the first time. It purchased the capital goods as well as inputs for its DTA unit. Therefore, duty was paid. Thereafter, with the permission of the authorities as reflected in CT- 3, the inputs were removed from DTA unit to the EHTP unit. Similarly, the capital goods purchased for DTA unit was used, it was not removed as such and when it was removed to EHTP unit again, they have no liability to pay the credit.
(See 2014-TIOL-1652-HC-KAR-CX)
