M/S.Tvs Srichakra Limited vs. The Commissioner Of CGST

Held

The Court held that the adjudicating authority had completely ignored the directions given by the Court in the previous round of litigation. The Court reiterated that the transaction of sale and lease-back of plant and machinery did not involve physical removal of goods from the factory premises. Relying on the Supreme Court decision in J.K. Spinning and Weaving Mills Limited and the Division Bench judgment of the Madras High Court in Commissioner of C.EX., Tiruchirapalli vs. CESTAT, Chennai (which was also cited in the previous order of this Court), the Court found that the "deemed removal" principle was incorrectly applied. The Court emphasized that the Central Board of Excise and Customs Circular No. 1063/2/2018-CX dated 16.02.2018, accepting the Madras High Court's decision, further bound the respondent. The Court found the impugned order to be arbitrary and violative of the previous court order and binding precedents. Therefore, the impugned order was quashed, and the matter was remitted back to the respondent for fresh consideration, with a specific direction to bear in mind the CBEC Circular and the principles laid down by the High Court. The Writ Petition was allowed.

Facts

The petitioner, M/s. TVS Srichakra Limited, engaged in tyre and tube manufacturing, faced liquidity issues and entered into an agreement to sell its plant and machinery to M/s. OPC Assets Solutions Private Limited for Rs. 55,30,00,000/- on March 22, 2013. Subsequently, the sold assets were leased back to the petitioner effective April 1, 2013. The respondent, Commissioner of CGST and Central Excise, issued a show cause notice on December 21, 2016, proposing to reverse the CENVAT credit availed by the petitioner on these capital goods, alleging deemed removal. An initial order confirming this was passed on October 31, 2017. This order was set aside by the High Court on February 23, 2018, and remitted for fresh consideration with an opportunity for personal hearing. Despite this, the respondent passed a fresh impugned order on September 28, 2018, reiterating the earlier stand and confirming the reversal of credit.

Key Issues

1. Whether the transaction involving the sale and lease-back of plant and machinery constitutes a "deemed removal" of goods attracting excise duty under the Central Excise Act, despite no physical removal from the factory premises? (Question of law turning on the interpretation of "removal" in the context of excise law). 2. Whether the respondent authority is bound by the decisions of the Madras High Court and the Circular issued by the Central Board of Excise and Customs, particularly when the previous order of the respondent was set aside by this Court on similar grounds? Petitioner's Arguments: - The petitioner argued that the Central Excise Act contemplates only physical removal of goods. They relied on the Supreme Court decision in J.K. Spinning and Weaving Mills Limited and the Madras High Court decision in Commissioner of C.EX., Tiruchirapalli vs. CESTAT, Chennai, which held that "removal" implies physical movement and that Rule 3(5) of the Cenvat Credit Rules, 2004, is not attracted without actual removal under an invoice. - They further contended that the respondent is bound by the Madras High Court's binding precedent and the CBEC Circular No. 1063/2/2018-CX dated 16.02.2018, which accepted the High Court's decision. They cited East India Commercial Co. Ltd. vs. Collector of Customs, Chennai, for the principle that authorities are bound by the law declared by the highest court in the state. Respondent's Arguments: - The respondent argued that the impugned order is appealable, and therefore, the writ petition should not be entertained.