2015 (7) TMI 1192 - AT - Central Excise

Reversal of CENVAT credit - Rule 3(5) of the CCR, 2004 - used glass bottles and crates returned by the customers to the Respondent were removed to its sister unit under proper challans - Held that - Since, no new bottles/plastic crates received in the factory of the Respondent were removed to its sister concern as such, the provisions of Rule 3(5) of the CCR, 2004 will not be applicable to such situation, inasmuch as the said provisions mandate payment of amount equal to Cenvat credit, in the eventuality, when the inputs or capital goods are removed as such from the factory - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Availment of Cenvat credit on glass bottles and crates for marketing finished products without reversing credit.
2. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004.
3. Classification of used bottles and crates as capital goods.
4. Adjudication of Cenvat credit demand, interest, and penalty.

Analysis:
1. The respondent, engaged in manufacturing aerated water and beverages syrup, availed Cenvat credit on glass bottles and crates used for marketing finished products without reversing the credit. The Department contended that the respondent should reverse the credit as per Rule 3(5) of the Cenvat Credit Rules, 2004.

2. The Tribunal noted that used glass bottles and crates returned by customers were transferred to the respondent's sister unit, and since no new bottles or plastic crates were removed from the factory, Rule 3(5) did not apply. The Commissioner (Appeals) also found no need for credit reversal, stating that used bottles were not subject to reversal. Additionally, the Commissioner clarified that packing material like bottles and crates did not qualify as capital goods under the definition.

3. The Tribunal upheld the Commissioner's decision, stating that the impugned order had no flaws. The appeal by the Revenue was dismissed, affirming that the removal of used bottles and crates did not warrant Cenvat credit reversal. The judgment emphasized the distinction between capital goods and packing material, supporting the respondent's position on the issue.

4. The adjudication order demanding Cenvat credit repayment, interest, and penalty was set aside by the Commissioner (Appeals), and the Tribunal upheld this decision, concluding that the respondent was not obligated to reverse the credit for the glass bottles and crates used in marketing their products. The judgment provided clarity on the application of Cenvat credit rules in such scenarios and the classification of materials as capital goods.