Appellants Must Reverse CENVAT Credit on Sold Capital Goods

The Tribunal held that the appellants must reverse the CENVAT Credit on capital goods sold in 2007 after being used in the factory premises, following the principles of depreciation at 2.5% per quarter of use. The matter was remanded for the determination of the specific credit amount to be reversed by the appellant. The decision allowed the appeals for further proceedings in light of the requirement to reverse the credit on the sold capital goods.

---

---

Issues:
- Whether the appellants are required to reverse credit/discharge duty on capital goods sold/cleared from the factory in 2007 after being installed and used between 1994 and 1997Rs.

Analysis:
1. Background: The appellants filed appeals against an Order-in-Appeal passed by the Commissioner of Central Excise, Mumbai-I, regarding the availed CENVAT Credit on capital goods sold in 2007 after being used in the factory premises for several years.

2. Appellant's Contention: The appellant argued that the used capital goods were not cleared "as such" for the purpose of Rule 3(5) of CENVAT Credit Rules, 2004. They cited the case of Madura Coats Pvt. Ltd. and Nahar Industrial Enterprises Ltd. to support their claim that duty was not payable on the sale of used capital goods.

3. Revenue's Argument: The Revenue contended that as per the Larger Bench decision in Navodhaya Plastic Industries Ltd.'s case, CENVAT Credit needed to be reversed by reducing the value at 2.5% per quarter of use of the machinery.

4. Judgment: The Tribunal found that conflicting views existed on whether the credit should be reversed on the sale of used capital goods. Following the Navodhaya Plastic Industries Ltd.'s case and the judgment of the Hon'ble Madras High Court in Rogini Mills Ltd.'s case, it was concluded that the appellant was required to reverse the credit on the capital goods after allowing depreciation at 2.5% per quarter of its use.

5. Decision: The matter was remanded to the adjudicating authority to determine the quantum of credit to be reversed by the appellant after considering the depreciation at 2.5% per quarter. The appeals were allowed by way of remand for further proceedings.

6. Conclusion: The judgment clarified the requirement for the appellant to reverse CENVAT Credit on capital goods sold in 2007 after being used in the factory premises, based on the principles of depreciation as per the Navodhaya Plastic Industries Ltd.'s case.

---