2011 (5) TMI 600 - AT - Central Excise

Reversal of cenvat credit on removal of old and used capital goods - Held that - As decided in Greenply Industries Ltd. vs. CCE, Jaipur 2010 (3) TMI 598 - CESTAT NEW DELHI that in cases of removal of Cenvated capital goods after use for some period, payment of the amount equal to duty on transaction value is sufficient and the reversal of Cenvat Credit originally taken is not required - in favour of assessee.

Summary

Issues:
1. Reversal of Cenvat Credit on sale of capital goods.
2. Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004.
3. Applicability of previous Tribunal and High Court judgments.

Analysis:

Issue 1: Reversal of Cenvat Credit on sale of capital goods
The case involved a manufacturer of PVC pipes who sold duty paid capital goods after using them for about 10 years. The department contended that the manufacturer should have reversed the Cenvat Credit originally taken in respect of those capital goods. The jurisdictional Deputy Commissioner confirmed the demand, and the Commissioner (Appeals) upheld the decision. The appellant argued that the sale of capital goods after use does not require reversal of Cenvat Credit, citing previous Tribunal and High Court judgments.

Issue 2: Interpretation of Rule 3(5) of Cenvat Credit Rules, 2004
The department emphasized that the capital goods were sold as capital goods and not as scrap, making it necessary to treat the sale as clearance of Cenvat credit availed capital goods. They argued that Rule 3(5) of Cenvat Credit Rules mandates the reversal of Cenvat Credit originally taken in case of removal of Cenvated capital goods. The appellant contended that the purpose of Cenvat Credit facility for capital goods would be defeated if reversal was required in such cases.

Issue 3: Applicability of previous Tribunal and High Court judgments
The Tribunal referred to previous decisions in similar cases where it was held that payment of duty on transaction value upon the sale of used capital goods is sufficient, and reversal of Cenvat Credit is not required. These judgments were based on the rationale that forcing reversal in such cases would undermine the purpose of the Cenvat Credit facility for capital goods. The Tribunal's decisions were upheld by various High Courts, reinforcing the principle that reversal of Cenvat Credit on the sale of used capital goods is not necessary.

In conclusion, the Tribunal found that the impugned order was not sustainable based on the precedent set by previous judgments. The appeal was allowed, setting aside the decision of the Commissioner (Appeals) and the jurisdictional Deputy Commissioner.