By TIOL News Service

MUMBAI, JAN 30, 2018: THE appellant removed capital goods after having used it for more than 10 years.

The department alleges that since the capital goods were cleared as scrap, they are liable to pay duty in terms of Rule 3(5A) of the CCR, 2004.

The demand was confirmed by the original authority and upheld by the Commissioner (Appeals).

In appeal before the CESTAT, the appellant submits that they had purchased the property (factory) along with plant and machinery on 'as is where is basis' from State Industrial and Investment Co. Ltd.(SICOM), a Government of Maharashtra undertaking,and on the capital goods no CENVAT credit was availed.

And, therefore, upon clearance as scrap after use of more than 10 years, no duty is payable under Rule 3(5A) of CCR, 2004.

It is further submitted that although the Commissioner(A) was satisfied that the appellant had not availed the CENVATcredit, yet he confirmed the demand on the ground that CENVATcredit "might have been availed by the earlier owner" of the factory,and, therefore, Rule 3(5A) of CCR is applicable. Inasmuch as since the assumption drawn by the lower appellate authority was not evidence based, the order is unsustainable, the appellant emphasized.

The AR justified the order.

The Bench inter alia observed -

"4. … As per the said Rules duty is payable on removal of capital goods after use thereof only when the assessee availed the cenvat credit at the time of receipt thereof. In the present case, the appellant have purchased the capital goods along with plant and machinery from SICOM, (a Government of Maharashtra undertaking) as is where is basis. At the time of purchase, admittedly no cenvat credit was availed by the appellant. This fact has been accepted by Ld. Commissioner (Appeals) in the impugned order. The Ld. Commissioner (Appeals) demanding duty on the ground that the appellant have not produced any documentary evidence of non-availment of cenvat credit on capital goods when they were initially purchased by the earlier owner. I find that these findings not flowing from the allegation made in the show cause notice, therefore, it is beyond the scope of show cause notice it cannot be sustainable. Moreover for the purpose of Rule 3(5A) of the Rule, it is to ascertain that whether the assessee who remove the capital goods, has availed the cenvat credit on such capital goods or otherwise. As per the fact of the present case, since the appellant has not availed the cenvat credit, demand under Rule 3(5) cannot be sustainable…"

The impugned order was set aside and the appeal was allowed with consequential relief.

(See 2018-TIOL-368-CESTAT-MUM)