Cenvat credit burden and recall of dismissal for non-prosecution lead to remand for factual verification.

An appeal dismissed for non-prosecution could be recalled where the notice was only for disposal of the stay matter and the appellant had not been heard on the merits; the recall application was therefore maintainable and the dismissal order was recalled. On the duty dispute, Rule 3(5) and Rule 3(5A) of the Cenvat Credit Rules, 2004 apply to waste and scrap arising from capital goods on which credit was taken. Where the assessee asserted that no Cenvat credit had been availed, the burden shifted to the Revenue to disprove that claim. As the record did not establish availing of credit, the matter was remitted for factual verification.

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Issues: (i) Whether the order dismissing the appeal for non-prosecution was liable to be recalled. (ii) Whether duty, interest and penalty were sustainable on clearance of waste and scrap of capital goods without reversal of Cenvat credit, and whether the dispute required factual verification.

Issue (i): Whether the order dismissing the appeal for non-prosecution was liable to be recalled.

Analysis: The notice was for disposal of the stay matter, and the appeal could not have been dismissed for non-prosecution when the appellant had not been heard on the merits of the appeal. The recall application was therefore maintainable.

Conclusion: The dismissal order was recalled and the recall application was allowed.

Issue (ii): Whether duty, interest and penalty were sustainable on clearance of waste and scrap of capital goods without reversal of Cenvat credit, and whether the dispute required factual verification.

Analysis: Rule 3(5) and Rule 3(5A) of the Cenvat Credit Rules, 2004 apply where waste and scrap arises from capital goods on which Cenvat credit has been taken. If the assessee asserts that the capital goods were not cenvatable and no credit was availed, the burden lies on the Revenue to prove otherwise. As no material was produced to show availing of Cenvat credit on the capital goods, the controversy turned on a factual issue requiring verification of records at the original level.

Conclusion: The impugned orders were set aside and the matter was sent back for verification of the assessee's records and a conclusive finding on the factual position.

Final Conclusion: The recall application succeeded, and the duty dispute was not finally decided on merits but was remitted for factual verification by the Central Excise authorities.

Ratio Decidendi: Where the assessee asserts that no Cenvat credit was taken on the capital goods from which waste and scrap arose, the Revenue bears the burden to disprove that assertion, and the issue must be determined on verified facts rather than on a purely legal assumption.

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