2007 (11) TMI 523 - AT - Central Excise

Summary

Issues involved: Whether the appellant is required to reverse the entire amount of Modvat credit availed in respect of capital goods cleared from the factory after use for 2-3 years.

Issue 1: Reversal of Modvat credit for capital goods removed from the factory:

The appellate authority held in favor of the assessee, stating that the capital goods were not removed "as such" by the appellants as per Rule 3(4) of the Cenvat Credit Rules, 2002. The authority referred to a Board Circular clarifying that duty payment for capital goods should consider depreciation. The appellants correctly paid duty for the capital goods removed after use in their factory. The authority also noted that for capital goods not physically removed but transferred due to change of ownership, no duty is payable, citing relevant case laws.

Issue 2: Duty on inputs removed after use:

The inputs purchased in 2000 were partially used in manufacturing final products, with a part quantity removed after 3.5 years. The quality of the removed inputs had deteriorated, affecting their market value. The authority found that the duty paid by the appellants for these inputs was correct, considering the circumstances of use and removal.

Conclusion:

The Revenue contended that the assessee should reverse the entire credit availed as per Rule 3(4) of the Cenvat Credit Rules. However, the Tribunal's decisions and the appellate authority's ruling supported the appellants' position, leading to the rejection of the Revenue's appeal due to lack of merit.