Cenvat credit on old capital goods: no duty payable on scrap sale where no credit was ever taken.

Duty under Rule 3(5) of the Cenvat Credit Rules, 2004 arises only when Cenvat credit has been taken on capital goods and those goods are later removed. Where old plant and machinery were sold as scrap, the assessee had not availed any Cenvat or Modvat credit on those assets, and the goods had been acquired before capital goods were brought within the Modvat scheme, no liability could be presumed. The Tribunal also noted that the machinery had been used for more than 10 years, and on those facts the demand was unsustainable. The duty demand was therefore held not payable and the Revenue appeal was rejected.

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Issues: Whether duty was payable on clearance of old plant and machinery sold as scrap when no Cenvat or Modvat credit had been taken on the capital goods and the goods had been acquired before the Modvat scheme for capital goods came into force.

Analysis: Liability under Rule 3(5) of the Cenvat Credit Rules, 2004 arises only where Cenvat credit has been taken on the capital goods and such capital goods are subsequently removed. The assessee had not availed any credit on the plant and machinery in question, and the assets were acquired prior to the introduction of Modvat credit on capital goods. In those circumstances, no presumption of credit could be drawn. The Tribunal also noted that the goods had been used for more than 10 years and that the impugned demand was not sustainable on the facts found.

Conclusion: The duty demand was not payable and the Revenue appeals were liable to be dismissed.

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