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of <h1>Operational Use Trumps Classification: Appellant Wins Stay on Duty & Penalty</h1> The appellant purchased dismantled overhead cranes as scrap but used them as operational capital goods in their factory. Despite Revenue's denial of ... Stay/Dispensation of pre-deposit - Cenvat/Modvat - Capital goods Issues:1. Denial of capital goods credit on the grounds of classification and nature of purchased item.2. Appellant seeking waiver of pre-deposit of duty and penalty.Analysis:Issue 1: Denial of capital goods creditThe appellant purchased dismantled overhead cranes as scrap from a supplier who had paid duty on them. The Revenue denied capital goods credit, arguing that the purchased item was classified as scrap and not eligible for credit. The appellant, supported by a Chartered Engineer's certificate, contended that the cranes were in working condition and used as capital goods in their factory. The Counsel cited precedents where the description in the invoice was not decisive for credit eligibility. The Member noted that the description in the invoice does not determine credit eligibility. The fact that the cranes were assembled and used as capital goods was crucial. The stay application was allowed, granting full waiver of pre-deposit of duty and penalty until appeal disposal.Issue 2: Waiver of pre-deposit of duty and penaltyThe appellant sought a waiver of pre-deposit of duty and penalty amounting to Rs. 1,28,000/-. The Member, after considering the strong case made by the appellant on merits, granted the waiver. The Member emphasized that the assembled scrap crane being used as capital goods warranted credit to the extent of duty paid by the seller. The stay application was allowed, and the recovery of duty and penalty was stayed until the appeal's final disposal. The matter was scheduled for an expedited hearing on 18th November 2005.In conclusion, the judgment favored the appellant, recognizing the assembled scrap crane as eligible for capital goods credit despite being purchased in a dismantled condition. The Member emphasized the operational use of the cranes as capital goods over the classification mentioned in the invoice. The decision highlighted the importance of the actual use of the purchased items over their initial classification for availing credit benefits.
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