2011 (2) TMI 740 - AT - Central Excise

Duty liability - Sale of the capital goods after their use for some years - Since the issue involved in this case is squarely covered by the decision of the Tribunal in the case of Greenply Industries Ltd. Vs. CCE, Jaipur 2010 -TMI - 78698 - CESTAT NEW DELHI , wherein it was held that at the time of removal of the used capital goods, duty only on the transaction value is required to be paid, the impugned order demanding an amount equal to the Cenvat credit originally taken is not correct and the same is set aside - The appeal is allowed.

Summary

Issues:
1. Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding payment of duty on disposal of used capital goods.
2. Validity of demand for short payment of duty and penalty imposed by the Department.
3. Applicability of the decision in the case of Greenply Industries Ltd. Vs. CCE, Jaipur to the present case.

Analysis:
1. The appellant, engaged in manufacturing motor vehicle parts, availed Cenvat credit on duty paid on inputs and capital goods. The issue arose when the appellant disposed of used capital goods (D.G. Sets) and paid duty on the transaction value. The Department contended that as per Rule 3(5) of the Cenvat Credit Rules, the appellant should have paid an amount equal to the Cenvat credit originally taken on the disposed capital goods. The Asstt. Commissioner confirmed a demand for short payment of duty, leading to an appeal against the order.

2. The Commissioner (Appeals) upheld the Asstt. Commissioner's order, emphasizing the requirement to pay an amount equal to the Cenvat credit originally taken on used capital goods. The appellant argued that a Division Bench of the Tribunal had previously ruled in their favor in a similar case, citing the Greenply Industries Ltd. Vs. CCE, Jaipur decision. The Departmental Representative defended the impugned order, asserting the necessity of paying the original Cenvat credit amount on disposal of capital goods.

3. Upon hearing both sides and examining the records, the Member (Technical) noted that the issue was conclusively addressed in the Greenply Industries Ltd. case. The Tribunal had ruled that duty on used capital goods should only be paid on the transaction value at the time of removal, not the original Cenvat credit amount. Consequently, the impugned order demanding the original Cenvat credit was deemed incorrect, and the appeal was allowed in favor of the appellant.