Cenvat credit reversal not required for fully used capital goods removed as waste or scrap after exhaustion of life.

Cenvat credit need not be reversed when fully used capital goods are removed as waste or scrap after exhausting their life. Scrap attracting duty under Section XV of the Central Excise Tariff Act, 1985 is confined to scrap generated from the mechanical working of metals or in the course of manufacture. Waste arising from old machinery or other fully utilised capital goods does not fall within that category, so removal of such items does not trigger reversal of credit. The contrary Tribunal ruling cited by Revenue was treated as factually distinguishable.

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Issues: Whether Cenvat credit was required to be reversed when fully utilized capital goods, after exhausting their life, were removed as waste and scrap.

Analysis: The capital goods had already served their intended utility and were removed only after exhaustion of life as old machinery. Scrap that attracts duty under Section XV of the Central Excise Tariff Act, 1985 is scrap generated from the mechanical working of metals or in the course of manufacture. Waste arising from fully utilized capital goods, or drums removed in the present context, did not fall within that category. The contrary Tribunal decision cited by the Revenue was held distinguishable on facts.

Conclusion: Cenvat credit was not required to be reversed, and the issue was decided in favour of the assessee.

Ratio Decidendi: Waste and scrap attracting duty under Section XV of the Central Excise Tariff Act, 1985 is limited to scrap generated from the mechanical working of metals or manufacturing process, and fully utilized capital goods removed after exhaustion of life do not require reversal of Cenvat credit.

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