NAKODAR COOP. SUGAR MILLS LTD. Vs. CCE

JUDGEMENT

(1.) HEARD both sides. The appellant filed this appeal against the impugned order passed by the Commissioner (Appeals) whereby demand was confirmed under Rule 3(4) of Cenvat Credit Rules in respect of old and used capital goods cleared by the appellants. The contention of appellant is that the capital goods i.e. old brass tubes after long use, were cleared as a scrap without payment of duty as the appellant has not availed credit in respect of these brass tubes. The contention is that the provision of Rule 3(4) of Cenvat Credit Rules, 2001 is applicable in case of input/capital goods were removed as such. The contention is that when inputs and capital goods are removed as such, the assessee has to reverse the credit. In the present case, the brass tubes were cleared as scrap after long use, therefore, it cannot be said that capital goods are cleared as such. The contention is also that there was no provision under the Cenvat Credit Rules during the period in dispute from 2001 to 2003 in respect of the duty on old and used capital goods. It was only w.e.f. 6.1.2005, the manufacturer is liable to pay duty in respect of capital goods cleared as waste and scrap. The appellant relied upon the decision of the Tribunal in the case of Triveni Engg. and Industries Ltd. v. CCE Meerut Final Order No. 1117/07 dated 19.7.2007 wherein in similar situation, the demand was set aside.

(2.) THE contention of revenue is that capital goods were cleared to the job worker without payment of duty. As the appellants were availing the benefit of credit, therefore, they are liable to pay duty.

(3.) IN this case from the beginning, the appellants case is that no credit has been availed in respect of the brass tubes which are cleared after long use. Further, I find that under Rule 3(4) of Central Credit Rules, a manufacturer is liable to pay duty in respect of inputs/capital goods which are removed as such. In the present case, the capital goods were not cleared as such and the same were cleared after long use and this fact is not in dispute. The Tribunal in the case of Triveni Engg and Industries Ltd. supra has held as under: Under the provisions of Rule 3(4) of Cenvat Credit Rules, 2001, it is only where the inputs/capital goods were removed 'as such', that the reversal of credit of duty of demand should be asked by the revenue. It is only from 16.5.2005 that the capital goods cleared as waste and scrap by the manufacturer became liable to payment of duty equal to the duty leviable on the transaction value by introduction of Sub -rule (5)(a) in Rule 3 of the Cenvat Credit Rules, 2004. It is also pointed from the decision in Madura v. CCE reported in 2005 (70) RLT 730 (CESTAT -Bangalore), that the assessee was not required to pay duty when the used machinery was shown (paragraph 5 of the order). Since the provision requiring payment of an amount equal to the duty leviable on transaction value in respect of capital goods cleared as waste and scrap, was introduced from 16.5.2005 as per Sub -rule (5)(a) of Rule 3 of the Cenvat Credit Rules, 2004, and earlier there was no such provision, as stated by both the sides, there was no question of any liability rising on the part of the appellant to pay amount equal to the duty leviable on the transaction value of such scrap. The provision of Rule 3(4) of the Cenvat Credit Rules, 2002, required the manufacturer to pay amount equal to credit availed in respect of the capital goods removed 'as such' from the factory. It is obvious that the worn out parts of machinery, which are discarded as scrap after their utility is totally lost as part of such machinery, cannot be considered to be the machinery (which is capital goods) 'as such'. Therefore, no duty liability could have been imposed on the appellant, since the new Rule 3(5)(a) was introduced only from 16.5.2005. Similar view has been taken in the appellant's own cases noted above in Excise Appeal No. 2805 of 2005 in which a similar order of the Commissioner (Appeals) was set aside. For the foregoing reasons, the impugned order confirming the demand of duty and imposing penalty and ordering recovery of interest is hereby set side. The appeal is accordingly allowed.