Cenvat credit on fire-damaged capital goods: prima facie waiver of pre-deposit justified where goods were not removed as such.

Capital goods used in a factory for several years, then transferred to another unit and substantially destroyed in a fire, were not prima facie to be treated as removed as such for Cenvat credit purposes. The scraps from the destroyed goods had been cleared on payment of duty, and repairable parts were sent for repair and received back under Rule 4(5)(a) of the Cenvat Credit Rules. On these facts, insurance compensation could not be equated with sale proceeds of capital goods cleared as such. The applicant therefore established a prima facie case for waiver of pre-deposit and stay of recovery.

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Issues: Whether the applicant had made out a prima facie case for waiver of pre-deposit and stay of recovery in respect of Cenvat credit demanded on capital goods destroyed in a fire accident.

Analysis: The capital goods had been used in the factory for several years and were later transferred to another unit, where they were destroyed substantially in a fire accident. The scraps from the destroyed goods had been cleared on payment of duty, and the repairable parts had been sent for repair and received back in terms of Rule 4(5)(a) of the Cenvat Credit Rules. On these facts, the goods could not prima facie be treated as removed as such, and the insurance compensation could not be equated with sale proceeds of capital goods cleared as such.

Conclusion: The applicant made out a prima facie case for waiver of pre-deposit and stay of recovery.

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