2026-VIL-563-CESTAT-CHE-CE
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CENTRAL EXCISE CESTAT Cases

Central Excise - Removal of capital goods under Rule 3(5) of the CENVAT Credit Rules, 2004 - The appellant raised invoices for sale of moulds to customers but the moulds continued to remain within the factory premises and were used in the manufacture of final products - Department contended that this amounted to removal of capital goods under Rule 3(5) and the appellant was required to reverse the CENVAT credit availed on such moulds - HELD – The mere issuance of invoices without physical movement of goods from the factory does not amount to removal under Central Excise law. When capital goods remain within the factory and are used in the manufacture of final products, reversal of CENVAT credit is not required - Raising invoices for sale of moulds without physical movement of the moulds from the factory does not amount to removal of capital goods under Rule 3(5) of the CENVAT Credit Rules, 2004 – When the moulds continued to remain within the factory and were used in the manufacture of final products, the appellant was not required to reverse the CENVAT credit availed on such moulds - the impugned order is set aside and the appeal is allowed - Whether the extended period of limitation has been correctly invoked – The extended period of limitation was wrongly invoked as the issue involved interpretation of law and there was no evidence of fraud, suppression or intention to evade duty on the part of the appellant. the dispute in the present case essentially relates to interpretation of Rule 3(5) of the CENVAT Credit Rules and the meaning of the term “removal”, and when the issue is interpretational and the relevant facts are available in statutory records, invocation of the extended period of limitation is not justified - Interest and penalty - Since the demand of reversal of CENVAT credit is held to be unsustainable, the interest under Section 11AA/11AB and penalties under Section 11AC of the Central Excise Act are also not sustainable. The penalties could not be imposed as the essential ingredients of mens rea required for invoking penal provisions were absent in the present case.
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