Proof of Cenvat credit availed is required before demanding duty on scrap clearance from capital goods.

Demand on clearance of scrap from capital goods under Rule 57S(2)(C) could not be sustained without evidence that Cenvat credit had actually been availed on those capital goods. The department had to prove that foundational fact before invoking the demand provision, and the record contained no such proof. The tribunal view followed earlier authority relied on in the order, and the demand was set aside, with the impugned order confirming it annulled in favour of the assessee.

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Issues: Whether the demand on clearance of scrap of capital goods could be sustained under Rule 57S(2)(C) of the Central Excise Rules, 1944 when there was no evidence that Cenvat credit had been availed on the capital goods cleared as scrap.

Analysis: The demand was founded on the allegation that the scrap arose from capital goods on which Cenvat credit had been taken. The record, however, contained no evidence establishing that credit had in fact been availed in respect of those capital goods. The burden to prove the foundational fact for invoking the demand provision lay on the department, and in the absence of such proof the demand could not be sustained. The view was consistent with the earlier tribunal decision relied upon in the order.

Conclusion: The demand was not sustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned order confirming the demand was annulled.

Ratio Decidendi: Where the department invokes a demand on the footing that scrapped capital goods had borne Cenvat credit, it must prove that credit was actually availed; absent such proof, the demand fails.

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