CENVAT Credit availed by appellant's predecessor in respect of capital goods which were removed by appellant to their sister unit - no provision in CCR to demand duty from appellant: CESTAT
By TIOL News Service
MUMBAI, OCT 08, 2015: THE appellant had made clearances of capital goods to their sister concern during the period 23.03.2000 to 22.01.2003.
Revenue view is that the appellant should have discharged the duty on the value of the capital goods cleared "as such" based upon the Valuation Rules.
The appellants contested the SCN on merits as well as on limitation on the ground that the impugned capital goods were purchased outright from M/s. McCoy Bottling Company Pvt. Ltd. under asset purchase agreement and no CENVAT Credit was availed on the same by the main appellant on such capital goods.
Adjudicating authority did not agree and confirmed the demand along with the associated interest and penalties.
The Commissioner(A) did not find any merit in the submission of the appellant and, therefore, rejected the appeal.
The following are the submissions made by the appellant before the CESTAT while seeking setting aside of the order -
+ it is undisputed that the main appellant had purchased the entire assets of the Company M/s. McCoy; that McCoy had availed CENVAT Credit on various capital goods purchased by them and were engaged in the manufacture of mineral water, aerated water and various other excisable goods.
+ it is an admitted fact that M/s.McCoy after availing CENVAT Credit on the capital goods utilized the same on clearance of the finished goods and at the time of sale of assets to the main appellant, CENVAT Credit was Rs. 830/-.
+ it is undisputed that the capital goods which were purchased by the appellant was transferred to their own sister concern and hence there would be no revenue loss even if demand is raised against the main appellant.
+ CE Registration was surrendered by M/s. McCoy and no objection was raised by the department as to ineligible availment of CENVAT Credit by the said M/s. McCoy and no demands were also raised on them for the clearance of the capital goods.
+ CCR clearly indicate that the CENVAT Credit availed on capital goods and clearance of them should be reversed "as such" by a manufacturer and there is nothing on record to indicate that the appellant had availed CENVAT Credit on the capital goods procured from M/s. McCoy.
+ penalties imposed on the individuals is unwarranted as they had clearly recorded in their statement that they had not availed CENVAT Credit on the capital goods purchased from M/s. McCoy.
The AR while reiterating the findings of the lower authorities submitted that the appellant is required to pay Central Excise duty equivalent to CENVAT Credit availed by M/s. McCoy when the capital goods are removed "as such"; that the liability to pay excise duty dues will get transferred on transfer of industrial units and successor needs to discharge the said liability.Case laws cited are Macson Marbles Pvt. Ltd. - 2003-TIOL-52-SC-CX, Hero Motors Ltd. - 2014-TIOL-574-CESTAT-DEL.
The appellant in his rejoinder distinguished the judgments cited by the AR and also emphasised upon the element of revenue neutrality and the fact that till the amendment of the CCR, 2004 on 13.11.2007 [39/2007-CE(NT)] there was no liability to pay duty when used capital goods were cleared from the factory. Jamshedpur Beverages - 2007-TIOL-230-SC-CX & Solectron Centum Electronics Ltd. - 2014-TIOL-1652-HC-KAR-CX refers.
The Bench inter alia observed -
++ When the assets were purchased by the main appellant there was no balance of CENVAT Credit in the statutory records viz. RG-23 Part II of M/s. McCoy.
++ It is to be noted that when CENVAT Credit is availed by the manufacturer (M/s. McCoy) and is not contested by the department during the material period and credit was availed, the purchaser of the capital goods cannot be saddled with the duty liability of CENVAT Credit which was availed by the original manufacturer as I do not find any provisions of law which indicate so.
++ The findings of the first appellate authority as to the CENVAT scheme placed onus on the user of CENVAT Credit to maintain proper documents and accounts hence the main appellant is liable to discharge the duty liability, is also incorrect inasmuch as, it is on record that the main appellant here-in has not utilised CENVAT Credit of the capital goods which were received by M/s. McCoy.
++ The first appellate authority has also recorded in the findings that non-transfer of CENVAT Credit does not mean non-applicability of CENVAT scheme to the appellant is also an erroneous findings inasmuch as the provisions of Cenvat Credit Rules puts onus on the manufacturer of the final product who has availed CENVAT Credit of the Central Excise duty paid on the capital goods.
++ It is undisputed that the main appellant has purchased the capital goods from M/s. McCoy and had not availed benefit of CENVAT Credit on the capital goods (sold) by the said M/s. McCoy.
++ In my considered view, the department should have demanded the Central Excise duty equivalent to CENVAT Credit availed on capital goods from M/s. McCoy, as having sold the assets, they have parted with the capital goods on which CENVAT Credit was availed.
Noting that the decision of the Karnataka High Court in the case of Solectron Centum Electronics Ltd. (supra) is very pertinent and the Bench is bound by the same inasmuch as the ratio laid therein would be applicable in the present case, the impugned order confirming the demand of duty was set aside.
The case laws cited by the AR were distinguished as being concerned with totally different facts.
The appeals were allowed.
(See 2015-TIOL-2147-CESTAT-MUM)
