Duty on scrap from used capital goods was not covered by Rule 3(4), supporting waiver of pre-deposit.

Duty was not shown to be leviable on scrap cleared from old and used capital goods under Rule 3(4) of the Cenvat Credit Rules, 2001, which provided for payment only where inputs or capital goods were cleared as such. On that basis, the assessee was held to have made out a strong prima facie case for waiver of pre-deposit. The pre-deposit request was accepted, and deposit of the duty and equal penalty was dispensed with.

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Issues: Whether duty was leviable on the scrap of old and used capital goods cleared by the assessee for the purpose of deciding the request for waiver of pre-deposit.

Analysis: The period in dispute was in 2001-2002. Rule 3(4) of the Cenvat Credit Rules, 2001 provides for payment of an amount equal to duty where inputs or capital goods are cleared as such, but it does not contain a provision for charging duty on scrap of capital goods. On that basis, the assessee was found to have made out a strong prima facie case.

Conclusion: The request for waiver of pre-deposit was accepted and the assessee was relieved from depositing the duty and equal penalty.

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