2013 (11) TMI 1027 - AT - Central Excise

Eligibility for cenvat credit Revenue was of the view that the appellant received was scrap and not capital goods Held that - Even if the appellant unit had received scrap capital goods, it is not disputed that they had used the same as capital goods - The question as to whether any goods are capital goods or otherwise has to be determined on the basis of how the same are used Following Maharshi Alloys (P) Ltd. vs. CCE, Tirupathi 2005 (11) TMI 281 - CESTAT, BANGALORE - just because in this judgment is in respect of the provisions of Central Excise Rules, 1994 pertaining to the Modvat credit, it cannot be said that the ratio of this judgment would not be applicable - there is no certificate of Chartered Engineer regarding the usability of the goods as capital goods, as the use of the goods received by the Appellant from their other units as capital goods is not disputed the order is not sustainable Decided in favour of Assessee.

Summary

Issues:
- Eligibility of Cenvat credit for receiving scrap capital goods
- Interpretation of Rule 3 (5A) of Cenvat Credit Rules
- Applicability of previous Tribunal judgment on similar case

Eligibility of Cenvat credit for receiving scrap capital goods:
The case involved a dispute where the department contended that the appellant unit, which had received scrap capital goods from another unit, was not eligible for Cenvat credit as the received items were considered scrap and not capital goods. The appellant argued that they had indeed used the scrap as capital goods and should be allowed the credit. The Tribunal noted that the determination of goods as capital goods should be based on their usage, and in this case, the appellant had utilized the received scrap as capital goods. The Tribunal also referenced a previous judgment in a similar case to support the appellant's claim. Ultimately, the Tribunal found in favor of the appellant, setting aside the department's decision and allowing the appeal.

Interpretation of Rule 3 (5A) of Cenvat Credit Rules:
The dispute also revolved around the interpretation of Rule 3 (5A) of the Cenvat Credit Rules, which stipulates that when Cenvat credit availed capital goods are cleared as scrap, duty equal to the transaction value is required to be paid. The department argued that since the goods received were scrap, the appellant could not avail the Cenvat credit. However, the Tribunal disagreed, emphasizing that the actual use of the goods as capital goods should determine eligibility for credit, rather than their initial classification as scrap. This interpretation played a crucial role in the Tribunal's decision to allow the appeal.

Applicability of previous Tribunal judgment on similar case:
The appellant relied on a previous Tribunal judgment in the case of Maharshi Alloys (P) Ltd. vs. CCE, Tirupathi to support their argument. The appellant contended that the principles established in that judgment were directly applicable to the present case, despite differences in the specific rules cited. The Tribunal agreed with the appellant, stating that the principles laid down in the previous judgment were relevant to the current dispute, even in the absence of a Chartered Engineer's certification regarding the usability of the received goods as capital goods. This reference to the previous judgment played a significant role in the Tribunal's decision to set aside the department's order and allow the appeal.