Cenvat credit reversal on damaged capital goods: prima facie compliance with removal duty rules justified waiver of pre-deposit.

Rule 3(4) of the Cenvat Credit Rules, 2002 applies when capital goods on which credit has been taken are removed as such from the factory, requiring duty payment on that removal. On a prima facie view, payment of duty on clearance of salvaged capital goods after a fire was treated as compliance with the rule. The appellant therefore established a prima facie case for complete waiver of pre-deposit of duty and penalty, and recovery was stayed pending the appeal.

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Issues: Whether waiver of pre-deposit of duty and penalty was warranted in a case involving capital goods destroyed in a fire, where the demand was based on alleged non-reversal of Cenvat credit.

Analysis: Rule 3(4) of the Cenvat Credit Rules, 2002 applies where capital goods on which credit has been taken are removed as such from the factory, requiring payment of duty on such removal. The order records that, on a prima facie view, the appellant had complied with the rule by paying duty on clearance of salvaged capital goods after the fire. In these circumstances, the appellant established a prima facie case for total waiver of pre-deposit, and recovery could be stayed pending the appeal.

Conclusion: Waiver of pre-deposit of duty and penalty was granted and recovery was stayed pending the appeal.

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