Cenvat credit on used capital goods cleared as scrap need not be reversed after their useful life ends.

Cenvat credit reversal was not required when fully utilized capital goods were cleared as waste and scrap after exhaustion of their useful life. The text distinguishes scrap generated by mechanical working of metals or in the course of manufacture, which falls within the taxable category, from old machinery or used capital goods removed after use, which do not. It also notes that the Revenue's relied-upon contrary decision was distinguishable on its facts. The assessee's position was therefore accepted.

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

Analysis: The removal of capital goods after they had completed their utility was examined with reference to the definition of waste and scrap under Section XV of the Central Excise Tariff Act. Scrap that is generated by mechanical working of metals or in the course of manufacture falls within the taxable category, whereas old machinery or fully utilized capital goods removed after use do not. The contrary decision relied on by the Revenue was held to be distinguishable on its facts.

Conclusion: Cenvat credit reversal was not required on the clearance of the fully utilized capital goods as waste and scrap, and the assessee's position was accepted.

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