2007 (10) TMI 68 - AT - Central Excise

Tribunal Upheld Order on Cenvat Credit for Capital Goods Cleared as Waste

The Tribunal upheld the Order-in-Appeal setting aside the Revenue's Orders-in-Original on the recovery of Cenvat credit for Capital Goods and inputs ... Only those scrap which arise as a result of mechanical working of metal or as a result of process defined in Section XV (of CETA) alone are dutiable – Scrap of fully utilized capital goods are not dutiable, so reversal of credit is not required Issues involved:Revenue's appeal against setting aside of Orders-in-Original regarding recovery of Cenvat credit on Capital Goods and inputs cleared as waste and scrap.Analysis:The Revenue challenged the Order-in-Appeal setting aside three Orders-in-Original related to the recovery of Cenvat credit on Capital Goods and inputs cleared as waste and scrap. The Commissioner (Appeals) observed that the assessee removed fully utilized Capital Goods as waste and scrap after their life was exhausted. The Revenue sought to recover the Cenvat credit utilized on these goods. However, the Commissioner (Appeals) determined that since the Capital Goods had fulfilled their utility, there was no requirement to reverse the credit.The learned Counsel cited various judgments to support their argument, emphasizing that only scrap arising from mechanical working of metals or manufacturing processes specified in Section XV of the Central Excise Tariff Act are dutiable. They presented judgments such as Precot Mills Ltd. v. CCE, Rajasthan Spinning & Weaving Mills Ltd. v. CCE, and others. The Counsel contended that these judgments favored their position, distinguishing the case of Indian Aluminium Co. Ltd. v. CCE, where empty drums were considered waste and scrap.The learned JDR referred to the Indian Aluminium case and argued that it should be applied, as decided by the Kolkata bench. This case involved the removal of empty drums considered waste and scrap, with a directive to reverse the credit. However, the learned Counsel maintained that the Capital Goods in question, being fully utilized, do not fall under dutiable scrap categories specified in Section XV of the Central Excise Tariff Act. They argued that the judgments cited were supportive of this interpretation, and the Indian Aluminium case was distinguishable.Upon reviewing the arguments and precedents, the Tribunal noted that the definition of Waste and Scrap in Section XV of the Central Excise Tariff Act pertains to scrap generated from mechanical working of metals, necessitating duty payment. In this case, the Capital Goods had served their purpose and were being discarded as old machinery, not meeting the criteria for dutiable scrap. The Tribunal found the Indian Aluminium case distinguishable, as it involved different circumstances. Relying on the judgments cited by the learned Counsel, including the Zuari Cement Ltd. case, the Tribunal upheld the impugned order, confirming it in favor of the assessee.