2007 (7) TMI 515 - AT - Central Excise

Cenvat/Modvat - Capital goods removed after use - Held that - the goods sold were not sold as waste and scrap - sub-rule (5a) in Rule 3 will have no application

Summary

Issues:
Challenge to reduction of confirmed demand and penalty by Commissioner (Appeals), consideration of depreciated value of capital goods, applicability of Rule 3(4) of Cenvat Credit Rules, 2002, interpretation of "as such" in the context of capital goods, scope for enhancing demand based on Madura Coats Pvt. Ltd. case, and justification for dismissal of appeal by the Revenue.

Analysis:
The judgment revolves around the challenge posed by the Revenue against the Commissioner (Appeals) order, which reduced the confirmed demand and penalty imposed on the Respondent. The Commissioner (Appeals) found that the Respondent did not discharge the correct duty liability concerning various capital goods and considered the depreciated value of these goods as per a Circular of the Board dated 26-5-1993. The Commissioner concluded that the used capital goods were cleared on payment of duty, and the Respondent did not dispute the duty liability initially but later contested it before the Commissioner (Appeals), whose order remained unchallenged by the Respondent.

Regarding the additional amount claimed by the Revenue under Rule 3(4) of the Cenvat Credit Rules, 2002, the judgment delves into the interpretation of "as such" concerning capital goods. It distinguishes between inputs used in manufacturing processes and capital goods required for manufacturing other goods. The judgment emphasizes that capital goods retain their identity even after use, and the expression "as such" refers to the identity of the goods at the time of their removal. The Tribunal's decision in Madura Coats Pvt. Ltd. case is cited to support the view that duty payment is not required when used machinery is sold, especially when goods are not sold as waste or scrap.

The judgment ultimately dismisses the Revenue's appeal, stating that no case has been established for enhancing the duty amount. It highlights that since the Commissioner (Appeals) calculated the depreciated credit amount based on the Circular dated 26-5-1993, there is no basis for increasing the demand. The judgment concludes by affirming the dismissal of the appeal by the Revenue, indicating that the impugned order does not warrant interference for enhancing the duty amount.

In summary, the judgment addresses the issues of reduced demand and penalty, consideration of depreciated value of capital goods, interpretation of Rule 3(4) of Cenvat Credit Rules, 2002, and the concept of "as such" in the context of capital goods. It clarifies the application of relevant legal principles and precedents to justify the dismissal of the Revenue's appeal.