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2015 (9) TMI 1021 - AT - Central ExciseReversal of cenvat credit - removal of capital goods after use - removal as waste / scrap or not - whether Appellant is entitled to refund of the duty paid at the time of clearance as wrongly reversal of credit - Held that - First Appellate Authority has rejected the claim of the Appellant on the grounds that the capital goods were cleared as waste and scrap on which appropriate amount equal to the duty leviable on transaction value of such waste and scrap was correctly paid as per Rule 3(5A) of the CENVAT Credit Rules, 2004. No evidence has been brought on record by the Revenue to suggest that the capital goods, on which CENVAT Credit was taken in 1997, were cleared as waste and scrap. On the contrary, Appellant has furnished copies of the sale invoices under which the description of the goods is not shown as waste and scrap but as model of old machinery. In view of the factual matrix available on record, the case of the Appellant was covered under the second proviso to Rule 3(5) and not under Rule 3(5A) of CENVAT Credit Rules, 2004. Following the provisions contained in Rule 3(5), after 10 years of use of the capital goods, the amount of credit required to be reversed becomes zero. Accordingly, it is held that the Appellant was not required to reverse CENVAT Credit taken with respect to the capital goods when removed from the factory as capital goods and was not cleared as waste and scrap of capital goods - Decided in favour of assessee.
Issues:
1. Eligibility of the Appellant for a refund claim of duty paid/reversed towards clearances of old machines from their CENVAT credit account. Analysis: The Appellant filed an appeal against the Order-in-Original (OIA) rejecting their refund claim regarding duty paid on the clearances of old machines as waste from their CENVAT credit account. The main contention was whether the Appellant is entitled to the refund claim. The First Appellate Authority rejected the claim based on Rule 3(5A) of the CENVAT Credit Rules, 2004, stating that the duty equivalent to the transaction value of waste and scrap needed to be paid. However, the Appellant argued that the machinery was sold as complete machines, not as waste and scrap. They highlighted that the CENVAT Credit taken on the capital goods was required to be reduced by 2.5% for each quarter, and by the time of sale, the credit required to be reversed had become zero. The Tribunal examined the case records and the arguments presented. It was crucial to determine if any CENVAT Credit needed to be reversed for the machineries sold and if the Appellant was eligible for a refund of the duty paid during clearance. The First Appellate Authority's decision was based on the assumption that the capital goods were cleared as waste and scrap, requiring the payment of duty as per Rule 3(5A). However, no evidence was provided by the Revenue to support this claim. The Appellant, on the other hand, presented sale invoices showing the goods as old machinery models, not waste and scrap. The Tribunal concluded that the case fell under the second proviso to Rule 3(5) of the CENVAT Credit Rules, 2004, where after 10 years of use, the credit required to be reversed becomes zero. Therefore, the Appellant was not obligated to reverse the CENVAT Credit taken for the capital goods sold as they were not cleared as waste and scrap. The appeal was allowed, but the Appellant was advised to only take credit in the CENVAT account as the full amount was not paid in cash. In conclusion, the Tribunal ruled in favor of the Appellant, emphasizing that the machinery was not cleared as waste and scrap, and thus, no CENVAT Credit reversal was necessary. The Appellant was deemed eligible for a refund of the duty paid during clearance, as per the provisions of Rule 3(5) of the CENVAT Credit Rules, 2004.
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