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2018 (5) TMI 1114 - AT - Central ExciseDemand of excise duty - capital goods sold as scrap - CENVAT/MODVAT credit was not availed in the capital goods. Held that - it is an admitted fact that the capital goods were procured prior to the introduction of MODVAT credit on capital goods and therefore, no credit was availed on the same at the time of procurement. The payment of duty on capital goods removed as such or removed as scrap, with reference to Rule 3 of CENVAT Credit Rules, 2004 arises only in a case where the assessee had availed credit on the capital goods which are removed from the factory. In the case of UOI vs. Hindustan Zinc Ltd. 2007 (3) TMI 198 - HIGH COURT RAJASTHAN wherein it is clearly held that if the capital goods which are not the one subjected to availing of MODVAT credit by the manufacturer, no duty is payable on removal of its waste and scrap from its factory. Appeal allowed - decided in favor of appellant.
Issues: Appeal against duty demand on dismantled plants and machinery cleared as scrap, challenge to penalty imposition, interpretation of CENVAT Credit Rules, applicability of MODVAT credit, duty payment on capital goods removed as scrap.
The case involved three appeals against a common impugned order passed by the Commissioner (A) regarding duty demand on dismantled plants and machinery cleared as scrap. The appellants, engaged in carbon black manufacturing, faced a show-cause notice demanding duty on old machinery cleared as scrap during specific periods. The appellants argued that the machinery was dismantled as per environmental regulations and no MODVAT credit was availed on the capital goods. The Original Authority confirmed the duty demand, which was further challenged in appeals resulting in the Commissioner (A) rejecting the appellant's appeal and enhancing the penalty. The appellant contended that the impugned order failed to consider relevant facts and laws, emphasizing no CENVAT credit availed on the machinery. The appellant cited various judgments supporting their position. The AR defended the impugned order. The Tribunal, after reviewing submissions and precedents, noted that no credit was availed on the capital goods procured before MODVAT credit introduction. The Tribunal found no basis for demanding duty on capital goods removed as scrap without credit availed, setting aside the impugned order and allowing all three appeals. In this case, the primary issue revolved around the demand for duty on dismantled plants and machinery cleared as scrap, with the Tribunal analyzing the applicability of CENVAT Credit Rules and the requirement for duty payment on capital goods removed as scrap. The appellants argued that no CENVAT credit was availed on the capital goods, emphasizing that duty payment is necessary only if credit was claimed on the goods removed. The Tribunal noted that the adjudicating authority confirmed duty without proper reasoning, especially when no credit was availed on the capital goods. By referencing precedents and the CENVAT Credit Rules, the Tribunal concluded that duty payment is linked to credit availed on capital goods, and in this case, where no credit was claimed, duty demand was unjustified. The Tribunal highlighted the relevance of the Hindustan Zinc Ltd. case, emphasizing that duty is not payable on waste and scrap of capital goods not subjected to MODVAT credit. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellant in all three appeals. The Tribunal's decision in this case centered on the interpretation of CENVAT Credit Rules and the obligation for duty payment on capital goods removed as scrap. The Tribunal acknowledged the absence of CENVAT credit availed on the capital goods in question, which led to the conclusion that duty demand without credit availed was unwarranted. By citing relevant judgments and legal provisions, the Tribunal established that duty payment is contingent on credit utilization, and in cases where no credit was claimed, duty imposition is not justified. The Tribunal's reliance on the Hindustan Zinc Ltd. case further reinforced the principle that duty is not payable on waste and scrap of capital goods not associated with MODVAT credit. Consequently, the Tribunal set aside the impugned order, allowing all three appeals and ruling in favor of the appellant based on the legal interpretation of CENVAT Credit Rules and duty payment requirements for capital goods removed as scrap.
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