2013 (12) TMI 1191 - AT - Central Excise

Cenvat credit on scrap of inputs and capital goods Applicability of Rule 5(A) w.e.f. 16.05.2005 under Notification No.27/05 - Waiver of Pre-deposit Assessee contended that there was no necessity for reversal of the CENVAT Credit availed on scrap as no such provision was in existence at that time - Held that -Prima facie there was force in the contention that payment of duty or reversal on scrap of capital goods became liable to duty w.e.f. 16.05.2005 and no such provision was there between January, 2004 to 15.6.2005 - CENVAT Credit involved after 16.05.2005 on scrap of capital goods is around Rs.38 Lakhs Assessee directed to deposit 25% of the amount of CENVAT Credit as pre-deposit upon such submission rest of the duty to be waived till the disposal Partial stay granted.

Summary

Issues:
- Application for waiver of pre-deposit of CENVAT Credit and penalty under section 11AC read with Rule 15 of CENVAT Credit Rules, 2004.

Analysis:
1. The appellant sought waiver of pre-deposit of CENVAT Credit amounting to Rs.3.05 Crores and an equal penalty imposed under section 11AC read with Rule 15 of CENVAT Credit Rules, 2004. The advocate for the appellant argued that a portion of the demand related to CENVAT Credit on cleared scrap of inputs, while the remaining amount was linked to CENVAT Credit on clearance of waste and scrap of capital goods. It was contended that the obligation to reverse credit on scrap of capital goods arose only from 16.05.2005 onwards with the insertion of Rule 5(A) to the CENVAT Credit Rules. The advocate asserted that prior to this date, there was no provision for such reversal, thereby arguing against the liability for the period before 16.05.2005. After considering the submissions, the tribunal found merit in the argument that the duty or reversal on scrap of capital goods became due only from 16.05.2005, and no such obligation existed between January 2004 and 15.6.2005. The tribunal noted that the CENVAT Credit involved after 16.05.2005 on scrap of capital goods amounted to approximately Rs.38 Lakhs.

2. The Additional Commissioner (A.R.) acknowledged that there was no prescribed provision for reversal of credit on scrap of capital goods before 16.6.2005, supporting the appellant's position. In light of the arguments and evidence presented, the tribunal directed the appellant to deposit 25% of the CENVAT Credit amount of Rs.38 Lakhs. Upon such deposit, the tribunal ordered the waiver of the balance amount of duties determined and stayed the recovery process during the pendency of the appeal. The appellant was instructed to report compliance by a specified date. The judgment was pronounced and dictated in open court by Dr. D.M. Misra.