2016 (12) TMI 586 - AT - Central Excise

MODVAT credit - Whether under the facts and circumstances where capital goods were acquired prior to the scheme of modvat was implemented and such capital goods after use of about more than 10 years have been disposed of during the Financial Years 2006-07. Whether the respondent-assessee is required to pay duty on removal or clearance of the same under the Rule 3(5A) of CCR, 2004? - Held that - I find that it is a undisputed fact that the appellants have not taken any Cenvat or Modvat credit on the plant machinery in question. Further there is no scope of any presumption of having taken credit when the assets were acquired prior to launch of Modvat Scheme w.e.f. 1/3/1994, with respect to capital goods. I further find that Rule 3(5) of CCR has provided for a condition precedent which is, that the assessee must have taken Cenvat Credit on the capital goods which are subsequently removed and accordingly under such circumstances the assessee is liable to pay duty on removal of capital goods, subject to allowance of depreciation under the said Rule. It is also an admitted fact that the respondent-assessee in the present case have held the assets for more than 10 years and as such is entitled 100% depreciation of Cenvat Credit, if any, taken at the time of acquisition. Under these observations, I find that the impugned order is correct and requires no interference - appeal dismissed - decided against Revenue-appellant.

Summary

Issues involved:
1. Whether duty is payable on disposal of capital goods acquired prior to the implementation of the modvate scheme after more than 10 years of use during the Financial Years 2006-07 under Rule 3(5A) of CCR, 2004.

Detailed Analysis:
1. The appeals were filed by the Revenue against a common Order-in-Appeal dated 16/10/2008. The main issue revolved around whether the respondent-assessee, a manufacturer of Sugar and Molasses, was liable to pay duty on the disposal of old plant and machinery as waste and scrap during 2006-07, which were acquired between 1992 and 1993, prior to the launch of the Modvat Credit Scheme. The Revenue alleged that duty was payable under Rule 3(5A) of CCR, 2004.

2. The respondent-assessee argued that the demand was void as they had not taken any Cenvat credit on the capital goods in question. They contended that since the assets were acquired before the Modvat Credit Scheme's launch in 1994, no duty should be imposed based on presumption. The learned Commissioner (Appeals) set aside the duty imposition, citing lack of evidence of Cenvat credit taken and the assets' pre-Modvat acquisition, pleading for the appeal's dismissal.

3. The Revenue, however, relied on a Tribunal ruling in a similar case where duty was upheld for clearing scrap without payment. The Tribunal found that the appellants had not availed Modvat Credit on the capital goods and that Rule 3(5) of CCR required Cenvat Credit to be taken on subsequently removed capital goods, subject to depreciation. As the assets were held for over 10 years, 100% depreciation was allowed, and duty was deemed payable on removal, leading to the dismissal of Revenue's appeals and granting consequential benefits to the respondent-assessee.

4. In conclusion, the judgment affirmed that duty was indeed payable on the removal of capital goods acquired prior to the Modvat Scheme's launch, as per Rule 3(5A) of CCR, 2004. The decision was based on the absence of Cenvat Credit taken, the assets' pre-Modvat acquisition, and the requirement for depreciation under the rule. The appeals by the Revenue were dismissed, and the respondent-assessee was entitled to consequential benefits as per the law.