No Reversal of CENVAT Credit of Excise Duty on Capital Goods after use it in Manufacture of Final Products under CCR: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that there was no provision in the CENVAT Credit Rules(CCR), 2004 to reverse the credit availed on capital goods after they were put into use in the manufacture of final products, even if they are worn out or damaged due to wear and tear. 

East India Holding Pvt. Ltd, the appellant assessee engaged in the manufacture of excisable goods Ingots, Billets, etc. in their factory, and the entire quantity of Cast Iron (CI) Mould were converted into scrap with time, and the said scrap was consumed in their furnace for manufacture of Ingot mold and as there was no mention of consumption of Cast Iron (CI)Mould scrap in their Daily Production cum Consumption slip and computerized monthly production register. 

The assessee appealed against the order passed by the Commissioner (Appeals) for confirming the demand for irregular CENVAT Credit and imposed a penalty equivalent to the irregular credit under Rule 15 of the CENVAT Credit Rules (CCR ), read with Section 11AC of the Central Excise Act, 1944. 

Ajay Sanwaria, the counsel for the assessee contended that all the molds purchased during the material period were put into use during the relevant period and after the use of C.I. Moulds, the same became damaged and accordingly consumed in their factory by melting the same along with other raw materials for the manufacture of their finished goods. 

P. K. Ghosh, the counsel for the department relied on the decisions made by the lower authorities and contended that the assessee availed irregular CENVAT Credit owing to clandestine removal of old and used C.I. Moulds (capital goods) without payment/reversal of CENVAT credit. 

The Bench observed that the CCR had provisions for reversal of credit availed on capital goods only in a situation where the capital goods are either removed as such or sold and the assessee had taken CENVAT credit correctly on the capital goods, namely C.I. Moulds and there was also no provision in the CCR to reverse the CENVAT credit when they are scrapped after put into use. 

The two-member bench comprising Ashok Jindal (Judicial) and Anpazhakan (Technical) held that the assessee is entitled to get the benefit of CENVAT credit on the capital goods in which they are used in the manufacture of final products. 

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