Sale of Used Capital Goods: Duty Not Applicable

The Tribunal upheld the Commissioner (Appeals)' decision, ruling that duty is not applicable on the sale of used Cenvated capital goods. The appeal was allowed, granting relief to the appellants.

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Issues involved: Interpretation of Rule 3(4) of Cenvat Credit Rules, 2001/2002; demand of duty on removal of used Cenvated capital goods; applicability of Board's Circular dated 1-7-2002.

In this case, the appellants, who had a 100% EOU debonded and continued operations under a different name, faced a demand for duty on capital goods removed after cessation of manufacturing activities. The jurisdictional officer demanded an amount equal to the Cenvat credit availed on the goods, along with interest and penalty. The Commissioner (Appeals) set aside the demand, stating there is no specific provision for such duty. The appellants, though the decision was in their favor, filed an appeal challenging the order.

During the appeal hearing, the appellants argued that Rule 3(4) of Cenvat Credit Rules, 2001/2002 does not apply to the removal of used Cenvated capital goods. They highlighted the absurdity of levying duty on such goods based on a Board's Circular from 2002, which pertained to goods in a different condition. The Commissioner (Appeals) had already found no provision for demanding duty on used Cenvated capital goods and referenced the Board's Circular from July 2002, clarifying its limited applicability to goods removed as such, not used machinery.

Ultimately, the Tribunal upheld the Commissioner (Appeals)' decision, emphasizing that duty is not required to be paid when selling used Cenvated capital goods. The appeal was allowed, providing consequential relief to the appellants. The operative portion of the order was pronounced in open court at the conclusion of the hearing.

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