2017 (6) TMI 1065 - AT - Central Excise

Clandestine removal - Clearance of scrap of machinery and machinery parts without payment of duty - case of the department is that the removal of scrap capital goods is liable for payment of duty in terms of Rule 3(4) of the CCR, 2002 - Held that - the same issue, in the appellant s own case, 2017 (1) TMI 161 - CESTAT MUMBAI , has been decided by this Tribunal, where it was held that From the plain reading of the above Rule 3(4), it is clear that the duty is required to be paid only if the capital goods is removed as such - In the present case, it is undisputed that the worn out parts of the capital goods were cleared, therefore in case of used parts/capital goods Rule 3(4) is not applicable - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 3(4) of the Cenvat Credit Rules, 2002 regarding payment of duty on clearance of scrap capital goods.
2. Applicability of previous tribunal orders on similar issues.
3. Relevance of cited judgments in determining the liability for duty payment on cleared capital goods.

Analysis:
1. The appellant, engaged in manufacturing excisable goods, availed modvat credit on duty for capital goods. The dispute arose when they cleared scrap machinery and parts without duty payment from April 1, 2004, to July 8, 2004. The department contended that Rule 3(4) of the Cenvat Credit Rules, 2002, mandated duty payment for such removals.

2. The appellant's counsel referred to a previous tribunal order (A/94274/16/SMB dt. 4.11.2016) where it was held that Rule 3(4) did not apply to the clearance of used parts or capital goods. This previous decision supported the appellant's case.

3. The Revenue, represented by the Superintendent (A.R.), relied on judgments like Collector of Customs, Madras and Others Vs. D. Bhoormull (1983), Phoenix Mills Ltd. Vs. Union of India (2004), and GNFC Ltd. Vs. Union of India (2007) to support their argument for duty payment on cleared capital goods. However, the presiding Member (Judicial) noted that the previous tribunal order had already settled the issue in the appellant's favor. The plain reading of Rule 3(4) indicated that duty was only required to be paid if capital goods were removed as such, which did not apply in the case of cleared worn-out parts. Therefore, the impugned order was set aside, and the appeal was allowed.

4. The presiding Member emphasized that the issue was no longer open for debate (res integara) due to the previous tribunal's decision. The cited judgments by the Revenue were deemed irrelevant to the current case, and the impugned order was overturned, allowing the appeal. The final decision was pronounced in court on May 19, 2017.