2016 (12) TMI 205 - AT - Central Excise

Reversal of CENVAT credit - glass bottles and crates - Rule 3(5) of the Cenvat Credit Rules, 2004 - manufacture of aerated water and Beverages syrup falling under Chapter 21 & 22 respectively of the Central Excise Takiff Act, 1985 - Held that - It is an admitted fact on record that used glass bottles and crates returned by the customers to the Respondent were removed to its sister unit under proper challans. Since, no new bottles / plastic crates received in the factory of the Respondent were removed to its sister concern as such the provisions of Rules 3(5) of the Cenvat Credit Rules, 2004 will not applicable to such situation, inasmuch as the said provisions mandate payment of amount equal to cenvat credit, in the eventuality, when the inputs or capital goods are removed as such from the factory. I also find that based on the available records, the Commissioner (Appeals) has held that used bottles were removed from the factory of the Respondent, for which no reversal of Cenvat Credit is called for. Further, the Commissioner (Appeals) has also held that even if bottles and crates are capable for repeated use, but the same cannot be considered as capital goods, since the definition does not cover packing material within its purview for consideration as capital goods. Appeal dismissed - decided against appellant-Revenue.

Summary

Issues:
Interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding reversal of credit on inputs removed from the factory.

Analysis:
The case involved the interpretation of Rule 3(5) of the Cenvat Credit Rules, 2004 regarding the reversal of credit on inputs removed from the factory. The Respondent, engaged in the manufacture of aerated water and beverage syrup, availed cenvat credit on glass bottles and crates purchased for marketing finished products. The Department contended that the Respondent should reverse the credit on inputs removed to a sister concern without doing so. The Commissioner (Appeals) set aside the demand, ruling that no reversal was required as used bottles were removed under proper challans and were not considered capital goods. The Tribunal upheld this decision, stating that Rule 3(5) does not apply when inputs are not removed as such from the factory. The judgment emphasized that even if items are capable of repeated use, they may not be considered capital goods if not covered by the definition.

In conclusion, the Tribunal found no error in the Commissioner's decision and dismissed the Revenue's appeal. The judgment clarified that the provisions of Rule 3(5) do not mandate reversal of cenvat credit when inputs are not directly removed from the factory, as in the case of used glass bottles and crates returned to a sister unit. The ruling highlighted the importance of proper interpretation of rules and definitions in determining the applicability of cenvat credit reversal requirements, particularly concerning the classification of items as capital goods.