Cenvat credit on scrapped capital goods requires record verification before duty liability can be finally determined

Duty on capital goods cleared as scrap under Rule 3(5A) of the Cenvat Credit Rules, 2004 depends on whether Cenvat credit was actually taken on those goods. The record-based factual question of prior credit availment was not verified, so the finding of liability could not be sustained on the existing adjudication. The matter was therefore set aside and remanded for de novo adjudication after examination of the relevant records and hearing the respondents, with no final merits ruling on duty liability.

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Issues: Whether duty on capital goods sold as scrap could be sustained without verification of whether Cenvat credit had actually been availed on those capital goods, and whether the matter required remand for fresh adjudication.

Analysis: Liability under Rule 3(5A) of the Cenvat Credit Rules, 2004 arises only where the capital goods sold as scrap were capital goods on which Cenvat credit had been taken. The finding of the original adjudicating authority that credit had been availed was not supported by reference to records. Since the existence or otherwise of Cenvat credit was a verifiable factual question, the matter could not be finally decided without examining the relevant records and hearing the respondents. The impugned appellate order was therefore not sustainable as a final determination on the factual basis adopted below.

Conclusion: The appeal was allowed by setting aside the impugned order and remanding the matter to the original adjudicating authority for de novo adjudication after verification of whether Cenvat credit had been availed.

Final Conclusion: The dispute was restored to the adjudicating stage for fresh factual determination, and no final ruling on duty liability was recorded on the merits.

Ratio Decidendi: Where liability to pay duty on scrap of capital goods depends on prior availment of Cenvat credit, the factual issue must be verified from records before the dispute can be finally adjudicated.

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