2004 (1) TMI 492 - AT - Central Excise

Summary

Issues: Interpretation of Rule 57S of the Central Excise Rules, 1944 regarding clearance of capital goods as waste and scrap; Reversal of Modvat credit on capital goods damaged in a fire accident.

In the judgment delivered by the Appellate Tribunal CESTAT, Bangalore, the case involved the appellant taking Modvat credit on capital goods, specifically 'Gantry System Works', which were later damaged in a fire accident and cleared as scrap upon payment of duty. The appellant argued that their case fell under sub-rule 2(c) of Rule 57S of the Central Excise Rules, 1944, allowing clearance of capital goods sold as waste and scrap on payment of duty. The appellant contended that there was no provision authorizing the reversal of credit and recovery directed by the adjudicating Commissioner in the impugned order.

Upon considering the arguments and examining the case records, the Tribunal found that sub-rule 2(c) of Rule 57S explicitly covers situations where capital goods are sold as waste and scrap, without distinguishing between goods becoming scrap due to use over time or due to incidents like a fire accident. The Tribunal noted the absence of a legal provision mandating a proportionate reversal of Modvat credit in such cases. Consequently, the Tribunal held that the impugned order, which required the reversal and repayment of part of the credit, could not be upheld. Therefore, the Tribunal set aside the impugned order and allowed the appeal in favor of the appellant.