2014 (12) TMI 120 - AT - Central Excise

Denial of CENVAT Credit - removal of capital goods after being put to use - Whether the appellant is required to pay duty under Rule 3(4) of the Cenvat Credit Rules, 2002 with respect to those capital goods on which cenvat credit is taken but are cleared as waste and scrap after its long usage in the factory of manufacture - period before 13-11-2007 - Held that - There is no evidence relied upon in the show cause notice that part of capital goods cleared was not put to use - cenvat credit of ₹ 13,79,969/- was taken by respondent with respect to the entire De-linking Plant imported whereas a part of De-linking plant was sold which is described as De-linking Cell on which respondent paid duty amount of ₹ 1,84,000/-. There is no allegation in the show cause notice dated 23.09.2004 that De-linking plant was sold as such and not after use. There is no specific finding of the lower authorities that De-linking plant was sold as such in the guise of scrap. There is no evidence on record that entire De-linking plant on which service tax credit ₹ 13,79,969/- was removed by the respondent. Thus for removing a part of De-linking plant after use on payment of duty, entire cenvat credit can not to be denied - Following decision of CCE, Chandigarh vs. Raghav Alloys Limited 2010 (4) TMI 294 - PUNJAB & HARYANA HIGH COURT - Decided against Revenue.

Summary

Issues Involved:
Whether the appellant is required to pay duty under Rule 3(4) of the Cenvat Credit Rules, 2002 with respect to capital goods cleared as waste and scrap after long usage.

Analysis:
The appeal involved a dispute regarding the requirement to pay duty under Rule 3(4) of the Cenvat Credit Rules, 2002 for capital goods cleared as waste and scrap after extended usage. The Revenue contended that the quantum of credit taken needed to be reversed based on the depreciated value of the capital goods at the time of removal, citing a judgment of the Madras High Court. On the other hand, the respondents argued, supported by various case laws, that capital goods cleared as such meant they were not installed, and therefore, credit reversal was not necessary. The respondents specifically pointed out that only a part of the capital goods was cleared as waste and scrap, emphasizing that the entire cenvat credit for the De-Inking plant should not be disallowed based on the removal of a single part. They highlighted that no separate CVD was paid for the De-Inking Cell, which was part of the imported De-Inking Plant.

The Tribunal examined the case records and relevant legal precedents. Referring to the judgment of the Punjab & Haryana High Court, it noted that no credit reversal was required if capital goods were cleared after utilization and not as such. The Tribunal emphasized that the purpose of Cenvat Credit on capital goods was to prevent duty cascading and that reversal after years of use would defeat this objective. It was highlighted that machines cleared after utilization should not be treated the same as those cleared as such. The Tribunal also referenced a proviso added to Rule 3(5) of the Cenvat Credit Rules, emphasizing the distinction between machines cleared without use and those cleared after utilization. The Tribunal found no evidence in the show cause notice that part of the capital goods cleared was unused, supporting the application of the case laws cited by the Respondent.

Further, the Tribunal noted that the respondent had availed cenvat credit for the entire De-Inking Plant but had only sold a part as waste and scrap, paying duty on the transaction value. There was no allegation that the plant was sold as such without use. The Tribunal concluded that denying the entire cenvat credit for removing a part of the plant after use was unwarranted. Consequently, the appeal filed by the Revenue was rejected, affirming the respondent's position.

This detailed analysis of the judgment showcases the thorough consideration of legal principles, case laws, and factual circumstances to arrive at a reasoned decision on the issues raised in the appeal.