Cenvat credit reversal on removal of capital goods upheld; duty pre-deposit required, penalty waiver granted for appeal hearing.

On removal of capital goods from the factory, the manufacturer was required to reverse Cenvat credit under Rule 3(5) of the Cenvat Credit Rules. The Tribunal distinguished the cited precedent relating to a 100% EOU and held that, because the applicant was not a 100% EOU, the statutory reversal requirement applied. As a result, complete waiver of pre-deposit of duty was declined and the assessee was required to deposit the duty for the appeal to proceed. Waiver was granted only in respect of the penalty for purposes of hearing the appeal.

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Issues: Whether, on removal of capital goods as such from the factory, the manufacturer was required to reverse the Cenvat credit availed on such capital goods and whether waiver of pre-deposit of duty and penalty could be granted.

Analysis: The applicant had availed Cenvat credit on capital goods and later removed them from the factory. The Tribunal distinguished the relied-upon precedent concerning a 100% EOU and held that, in the present case, the applicant was not a 100% EOU. Under sub-rule (5) of Rule 3 of the Cenvat Credit Rules, the manufacturer was required to reverse the credit on capital goods when removed from the factory. In view of that statutory position, the plea for complete waiver of pre-deposit of duty was not accepted.

Conclusion: The applicant was directed to deposit the entire duty amount, and waiver of pre-deposit was granted only in respect of the penalty for purposes of hearing the appeal.

Final Conclusion: The application for waiver was rejected to the extent of duty and allowed only as to penalty, leaving the assessee liable to make the required duty deposit before the appeal could be heard.

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