By TIOL News Service

BANGALORE, MAR 26, 2018: DURING CAG's Audit it was noticed that the appellant had availed 100% credit on capital goods during FY 2010-11 instead of 50% as available during one Financial year.

Accordingly, a SCN was issued alleging suppression and the demand was confirmed along with interest and penalty.

The appellant is before the CESTAT.

It is submitted that the impugned capital goods are used capital goods removed from one premises of the appellant to another on account of shifting of the factory and, therefore, the provisions of Rule 3(6) which provides for removal of used capital goods on reversal of credit and availment of such reversed credit by recipient would apply and not the provisions of Rule 4(2) mandating availment of credit in installments. The invoice is also placed on record and it is further submitted that the Commissioner (Appeals) had not applied Rule 10 of CCR, 2004 regarding transfer of credit on shifting of their factory to new location. Reliance is placed on the decision in S.C. Johnson P Ltd. - 2016-TIOL-1252-CESTAT-DEL [to emphasise that no prior permission is required u/r 10 for transfer of cenvat credit]; that since credit is not utilized no interest is payable [ Bill Forge Ltd. - 2011-TIOL-799-HC-KAR-CX ]; that since the details of availing credit were mentioned in ER-1, the demand is barred by limitation [ Cosmic Dye Chemicals - 2002-TIOL-236-SC-CX-LB, Tamil Nadu Housing Board - 2002-TIOL-288-SC-CX & Chemphar Drugs & Liniments - 2002-TIOL-266-SC-CX.]

The AR supported the order.

The Bench considered the submissions and inter alia observed -

+ In the present case Rule 3(6) is applicable and not Rule 4(2). Further I find that the provisions of Rule 3(6) provides for removal of used capital goods on reversal of credit and availment of such reversed credit by recipient.

+ I find that the invoice vide which the old capital asset was shifted to the new factory clearly shows that the goods on which credit has been availed are used capital goods and they have been removed from one location to another location on payment of duty and thereafter cenvat credit was taken.

+ I find that invoking the extended period is not justified in the present case because there was no intention to evade payment of duty. The capital goods so transferred from one factory to another factory by way of invoice which is on record and the appellant had bona fide belief that it is permitted under Rule 10.

Concluding that the case laws cited by the appellant apply to the facts on hand, the impugned order was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-948-CESTAT-BANG)