Case Note & Summary
The appellant, M/s. Betts India Pvt. Ltd., filed an appeal against the order of the Commissioner of Central Excise (Appeals) confirming the demand for reversal of Cenvat credit on capital goods removed from their unit in Goa to their unit in Himachal Pradesh. The substantial question of law framed was whether the proviso added in 2007 to sub-rule (5) of Rule 3 of the Cenvat Credit Rules, 2004 is clarificatory and retrospective, and whether the words 'as such' in the rule contemplate removal of capital goods without use. The High Court held that the proviso is clarificatory, relying on the Supreme Court's decision in WPIL Ltd. v. Commissioner of Central Excise, and thus operates retrospectively. The court also noted that the appellant did not dispute that the words 'as such' include used capital goods, and the only dispute was regarding the quantum of credit reversal. The Full Bench decision in Cummins India Ltd. v. Commissioner of Central Excise was cited to support that the entire credit is required to be reversed. The court dismissed the appeal, answering the substantial question of law against the appellant and in favor of the Revenue.
Headnote
A) Central Excise - Cenvat Credit - Retrospective Operation of Clarificatory Amendment - Cenvat Credit Rules, 2004, Rule 3(5) - The proviso added in 2007 to sub-rule (5) of Rule 3 is clarificatory in nature and operates retrospectively, as held by the Supreme Court in WPIL Ltd. v. Commissioner of Central Excise. The amendment makes explicit what was implicit, and therefore the credit reversal is required on clearance of capital goods even prior to the amendment. (Paras 2-3)
B) Central Excise - Cenvat Credit - Removal of Capital Goods 'as such' - Cenvat Credit Rules, 2004, Rule 3(5) - The words 'as such' in sub-rule (5) of Rule 3 include used capital goods. The appellant's contention that the capital goods were not exported but transferred to another unit does not affect the requirement of credit reversal. The Full Bench decision in Cummins India Ltd. v. Commissioner of Central Excise supports this interpretation. (Paras 4-6)
Issue of Consideration
Whether the proviso added in 2007 to sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004 is clarificatory in nature and operates retrospectively, and whether in absence of said proviso the words 'as such' appearing in sub-rule (5) of Rule 3 contemplated the removal of cenvated capital goods without use.
Final Decision
The appeal is dismissed. The substantial question of law is answered against the appellant and in favour of the Revenue.
Law Points
- Clarificatory amendment operates retrospectively
- Removal of capital goods 'as such' includes used capital goods
- Credit reversal required on clearance of capital goods
Case Details
2019 LawText (BOM) (09) 217
Excise Appeal No. 4 of 2009
M. S. Sonak, Nutan D. Sardessai
Mr. P. Faldessai for appellant, Ms. Shubhangi Sawant h/f. Ms. Asha Desai for respondent
M/s. Betts India Pvt. Ltd.
Commissioner of Central Excise
Subscribe to unlock Case Details (Citation, Judge, Date & more)
Subscribe Now
Nature of Litigation
Excise appeal against order of Commissioner of Central Excise (Appeals) confirming demand for reversal of Cenvat credit.
Remedy Sought
Appellant sought to set aside the order demanding reversal of Cenvat credit on capital goods removed from their unit in Goa to their unit in Himachal Pradesh.
Filing Reason
Appellant challenged the order of the Commissioner of Central Excise (Appeals) which confirmed the demand for reversal of Cenvat credit on capital goods removed without use.
Previous Decisions
The Commissioner of Central Excise (Appeals) confirmed the demand for reversal of Cenvat credit. The appeal was admitted on 22/04/2009 on the substantial question of law.
Issues
Whether the proviso added in 2007 to sub-rule (5) of Rule 3 of Cenvat Credit Rules, 2004 is clarificatory in nature and operates retrospectively.
Whether in absence of said proviso, the words 'as such' in sub-rule (5) of Rule 3 contemplate removal of cenvated capital goods without use.
Submissions/Arguments
Appellant argued that the capital goods were not exported but merely transferred to another unit, and the Tribunal failed to consider this distinguishing feature.
Appellant contended that since the capital goods were used, the entire credit was not required to be reversed.
Respondent supported the order of the Commissioner and argued that the proviso is clarificatory and retrospective.
Ratio Decidendi
The proviso added in 2007 to sub-rule (5) of Rule 3 of the Cenvat Credit Rules, 2004 is clarificatory in nature and operates retrospectively. The words 'as such' in sub-rule (5) include used capital goods, and credit reversal is required on clearance of such capital goods.
Judgment Excerpts
According to us, the proviso added in 2007 to sub Rule 5 of Rule 3 to the Cenvat Credit Rule, 2004 is clearly clarificatory in nature.
In case of WPIL Ltd., Ghaziabad v/s. Commissioner of Central Excise, Meerut, UP, the Apex Court has held that a clarificatory notification would take effect retrospectively, since such a notification merely clarifies the position and makes explicit what was implicit.
According to us, the record is quite clear that the capital goods were removed or were cleared from the appellant's unit in Goa.
Procedural History
The appellant filed an appeal before the Commissioner of Central Excise (Appeals) against the demand for reversal of Cenvat credit. The Commissioner confirmed the demand. The appellant then filed the present appeal before the High Court, which was admitted on 22/04/2009 on the substantial question of law. The High Court heard the appeal and delivered judgment on 24/09/2019.
Acts & Sections
- Cenvat Credit Rules, 2004: Rule 3(5)
