2008 (4) TMI 645 - AT - Central Excise

Summary

Issues involved: Interpretation of Cenvat credit rules regarding reversal of credit on capital goods removed as scrap.

The judgment by the Appellate Tribunal CESTAT, Ahmedabad dealt with the issue of availing Cenvat credit on capital goods and the requirement to reverse the credit when the goods are cleared as scrap. The appellants had utilized the capital goods for 7 to 8 years before clearing them as scrap and paid appropriate duty on the transaction value. However, the Revenue contended that the total Modvat credit initially availed should be reversed. The original adjudicating authority and the Commissioner (Appeals) upheld this view, leading to the present appeal.

In a similar proceeding for a different period, the Commissioner (Appeals) had previously allowed the appeal of the appellants. This decision was confirmed by the Tribunal when the Revenue's appeal was rejected. The Tribunal's earlier order highlighted that the duty paid on capital goods should be determined after allowing depreciation, and the duty paid need not be equal to the amount of credit availed u/s Rule 3(4) of the Cenvat Credit Rules, 2002. Citing precedents, including the cases of Madura Coats Pvt. Ltd. and Salona Cotspin Ltd., the Tribunal emphasized that the reversal of credit is required only when capital goods are removed "as such" and not when they are removed after use. Consequently, the impugned order was set aside, and the appeal was allowed with consequential relief to the appellant.