2007 (12) TMI 151 - AT - Central Excise

Credit on CG denied on the ground that the nature of the said capital goods have been written off before use it is clear that the capital goods had been scrapped as the automobile models in which they were to be used, became obsolete - there is no provisions that if capital goods have not been used for its full life, can be treated as the same has not been used - CG in question have been used in mfg. of final products & they are still lying in the factory, hence credit can t be denied

Summary

Issues:
- Demand of duty on scrapped capital goods before use
- Applicability of case laws on written off value
- Disclosure of facts in books of accounts
- Extended period of limitation

Analysis:
1. Demand of duty on scrapped capital goods before use:
The case involved the appellants engaged in manufacturing automobile components, where the auditors noticed scrapped dies and moulds written off in the balance sheet as obsolete. The adjudicating authority confirmed duty demand and penalty, alleging the capital goods were written off before use. The Commissioner (Appeals) upheld this decision. The appellant argued that the capital goods were still in their factory premises and the demand was unsustainable. The Tribunal found that if capital goods were withdrawn due to model obsolescence, it did not mean they were not used. The adjudicating authority's finding was deemed an assumption, and the Tribunal cited precedents where credit cannot be denied if inputs are still in the factory, even if written off. Relying on these precedents, the duty demand was set aside in favor of the appellant.

2. Applicability of case laws on written off value:
The appellant cited case laws to support their argument that the demand was barred by limitation and the value of capital goods was written off after use in manufacturing finished goods. The Tribunal agreed that the written off value did not automatically imply non-usage, especially when the capital goods were still in the factory. Precedents were cited where credit could not be denied based solely on written off values in the books of accounts. The Tribunal found merit in the appellant's submissions and set aside the demand of duty.

3. Disclosure of facts in books of accounts:
The Department reiterated the findings of the Commissioner (Appeals) regarding the written off value and extended period of limitation. However, the Tribunal observed that the appellant's failure to disclose the written off value in their books of accounts did not automatically justify the duty demand. The focus remained on the actual usage of the capital goods in manufacturing, which the Tribunal found to be in favor of the appellant.

4. Extended period of limitation:
The Department argued for the applicability of the extended period of limitation due to alleged non-disclosure of facts. However, the Tribunal found that the demand was not sustainable based on the usage of capital goods in manufacturing processes. As the issue favored the appellant on merit, the demand of duty was set aside, and the appeal was allowed without delving into other points. The impugned order was overturned, granting consequential relief to the appellant.