2010 (9) TMI 1068 - AT - Central Excise

Summary

Issues Involved:
The appeal is against the demand of Rs. 1,64,734/- confirmed along with interest and penalty for non-reversal of CENVAT credit availed on capital goods removed 'as such' under Rule 3(5) of CENVAT Credit Rules, 2004.

Details of the Judgment:

Issue 1: Contravention of Rule 3(5) of CENVAT Credit Rules, 2004
- The appellant, engaged in manufacturing excisable goods, availed CENVAT credit on inputs, capital goods, and input services.
- Received plain cylinders/rollers from vendors, cleared them for engraving/rechroming, and availed CENVAT credit upon receipt.
- Appellant cleared same cylinders/rollers for reconditioning without payment of Central Excise duty, leading to a show-cause notice for contravention of Rule 3(5).
- Appellant argued that the goods were not cleared 'as such' as they were used before clearance.
- CENVAT credit denial based on the interpretation of 'as such' in Rule 3(5) was challenged citing relevant case laws.

Issue 2: Reversal of CENVAT Credit on Capital Goods
- The department contended that if capital goods are removed 'as such,' the availed credit should be reversed.
- Tribunal examined submissions and relevant case laws to determine if the appellant was required to reverse the credit on capital goods removed 'as such.'
- Tribunal distinguished the applicability of Rule 4(5)(a) from Rule 3(5) in the context of the case.
- Ruled in favor of the appellant, citing precedents where the High Court held that when capital goods are removed 'as such' after use, reversal of credit is not necessary.
- Decision aligned with the principle that reversing CENVAT credit on capital goods cleared after use would lead to absurd results.

Conclusion:
The Tribunal allowed the appeal, setting aside the impugned order, as the appellant was not required to reverse the CENVAT credit availed on the capital goods removed 'as such' after use, in accordance with relevant legal interpretations and precedents.