2006 (12) TMI 397 - AT - Central Excise

Summary

Issues:
1. Appeal against Order-in-Appeal vacating demand made on the appellant.
2. Interpretation of Circular No. 17/2002 regarding payment of duty on capital goods.
3. Validity of demand for payment of duty on removed capital goods beyond normal period.

Analysis:
1. The appeal was filed by the Revenue against the Order-in-Appeal vacating the demand of Rs. 97,714 made on the appellant for removing a Diesel Generating set on which duty credit was availed. The lower appellate authority relied on the Tribunal's decision in Madura Coats Pvt. Ltd. v. CCE, where it was held that duty was not required to be paid when used machinery (capital goods) was sold. The Commissioner also referred to the decision in Salona Cotspin Ltd. v. CCE, Salem, following the Madura Coats decision.

2. The Revenue argued that the Tribunal's finding in Madura Coats case regarding Circular No. 17/2002 of the Board applying only to capital goods removed as such was incorrect. They cited a clarification in the Circular allowing adequate depreciation for capital goods. However, the Consultant contended that duty was not necessary when capital goods were removed after use, as per the Madura Coats decision. The original authority's demand was also questioned due to a Show Cause Notice issued beyond the normal period.

3. The Tribunal considered Rule 3(4) of Cenvat Credit Rules, 2002, which required duty payment when capital goods were removed as such. In this case, the goods were removed in 2002 without duty payment, but later Rs. 35,000 was paid as directed by the department. Following the Madura Coats decision, it was concluded that duty was payable only if capital goods were removed without being used. Despite the Board's differing view in the Circular, the Tribunal found no issue with the impugned order and dismissed the Revenue's stay application.