2018 (5) TMI 1286 - AT - Central Excise

Reversal of CENVAT credit - removal of scrap generated and old capital goods - whether the appellant is required to pay duty by way of reversal under Rule 3(5) or 3(5)(A) of CCR, 2004 on removal of the scrap generated from used and old capital goods? Held that - it is not the case of Revenue that either the appellant have not maintained proper records as required under the scheme of the Act and the Rules or they failed to furnish any information as called from them - the affidavit submitted by the competent person of the appellant was not found to be wrong and have been rejected without any reason for doing so - the show cause notice is presumptive and hence not maintainable. It appears that the plant was definitely more than 10 years old which have been removed. Thus the depreciated value also becomes nil in course of time calling for no reversal of Cenvat credit (as per amended rules). Appeal allowed - decided in favor of appellant.

Summary

Issues: Whether duty is required to be paid by way of reversal under Rule 3(5) or 3(5)(A) of CCR, 2004 on removal of scrap generated from used and old capital goods.

Detailed Analysis:

1. Background and Allegations: The appellant, a manufacturer of dutiable industrial gases, was alleged to have sold damaged capital goods and scrap without paying duty during a specific period. The Revenue claimed that the appellant must have availed Cenvat credit on the capital goods and should pay duty on the transaction value of the cleared waste and scrap under Rule 3(5A) of CCR, 2004.

2. Show Cause Notice and Representation: The show cause notice required the appellant to pay duty along with interest and penalty, invoking the extended period of limitation. The appellant contested the notice, requesting relevant details of the alleged credit availed on capital goods. They submitted an affidavit asserting that no credit was taken on the scrapped plant and machinery.

3. Adjudication and Appeal: The Joint Commissioner confirmed the duty, interest, and penalty, stating that the appellant failed to prove the exempt status of the scrap. The appeal before the Commissioner (Appeals) was rejected, leading the appellant to approach the Tribunal.

4. Tribunal's Decision: The appellant argued that the show cause notice was presumptive and not maintainable, emphasizing that the scrapped plant did not have Cenvat credit. They cited a precedent where the burden of proof was on the Revenue to provide evidence. The Tribunal found that the appellant maintained proper records and the affidavit was not disproved. Consequently, the show cause notice was deemed presumptive and not maintainable, leading to the appeal being allowed, and the impugned order set aside.

5. Conclusion: The Tribunal's decision highlighted that the appellant was entitled to depreciation on the capital goods, and as the plant was over 10 years old, the depreciated value became nil, necessitating no reversal of Cenvat credit. The appellant was granted consequential benefits, if any, in accordance with the law.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT ALLAHABAD showcases the legal intricacies involved in determining the duty liability on scrapped capital goods and the importance of maintaining proper records and proving allegations in such cases.