2011 (6) TMI 420 - AT - Central Excise

Clearance of capital goods after intense use to be cleared as such or scrap - sale of transformers(capital goods) received and utilized for more than ten years - excise duty paid on the transaction value - Revenue confirmed the demand of differential duty holding that capital goods should be cleared as such and duty payable on goods cleared as such should be equal to the credit originally taken - Held that - The clearance of such old and used transformer though described in the invoice as transformer cannot be treated cleared as such unless it was shown that the buyer has used it as transformer and not as scrap. In the absence of evidence it should be treated as clearance of transformer as scrap, as claimed by the appellants. See Modernova Plastyles Pvt.Ltd. (2008 - TMI - 31876 - CESTAT, MUMBAI) - Decided in favor of assessee.

Summary

Issues:
- Appeal against Commissioner (Appeals) order dated 22.1.2009 regarding cenvat credit on transformers sold as scrap.
- Determination of whether transformers were cleared 'as such' or as scrap.
- Application of duty payable on goods cleared 'as such' compared to credit originally taken.

Analysis:
Issue 1: The appeal was filed against the Commissioner (Appeals) order dated 22.1.2009, challenging the demand of differential duty and penalty imposed on the appellants for selling transformers as scrap after utilizing them for more than ten years.

Issue 2: The main issue revolved around whether the transformers were cleared 'as such' or as scrap. The department alleged that the transformers were cleared 'as such', resulting in a demand for differential duty. However, the appellants contended that the transformers were sold only as scrap, with the high value attributed to the metal contents in the old and used transformers.

Issue 3: The question of the duty payable on goods cleared 'as such' compared to the credit originally taken was also addressed. The department argued that the duty payable on goods cleared 'as such' should be equal to the credit originally taken, relying on a decision of the Larger Bench of the Tribunal in a specific case.

The judgment analyzed the submissions and evidence presented. It was noted that the show cause notice alleged the clearance of transformers 'as such', but no investigation was conducted by the department to confirm this claim. The Tribunal highlighted that the mere description of the transformers as such in the invoice does not prove their actual use by the buyer. Without evidence supporting the claim that the transformers were used as intended, the allegation of clearance 'as such' could not be accepted. The judgment emphasized that the interpretation proposed by the department would unjustly disallow credit despite the undisputed use of capital goods for their intended purpose for over ten years.

Ultimately, the Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeal, granting consequential relief to the appellants as per the law. The decision underscored the importance of evidence and proper investigation to determine the nature of goods cleared and upheld the appellants' position that the transformers were sold as scrap, not 'as such'.