2020 (1) TMI 1449 - AT - Central Excise

Tribunal Overturns Excise Commissioner's Order, Validates Appellant's Duty Payment Method

The Tribunal set aside the impugned order passed by the Commissioner of Central Excise, allowing the appeal with consequential relief. The Tribunal held ... Non-reversal of equivalent amount of cenvat credit attributable to inputs in waste and scrap not returned - contravention of Rule 4(5)(a) of the Cenvat Credit Rules - HELD THAT:- As per the correspondence of the appellant with the Range Superintendent, the duty on the subject waste and scrap generated at the job worker’s end was in fact paid by the appellant, upon ascertaining the value thereof, taking the value of the processed scrap generated through similar operation at the appellant’s factory and which the appellant sold on a regular basis, and invoice details in respect whereof were available. In the absence of any other evidence on record, this establishes the correctness of the transaction value of the waste and scrap sold. Hence, the contrary finding of the Commissioner is erroneous. In the case of COMMISSIONER OF C. EX., HYDERABAD VERSUS NOVAPAN INDUSTRIES LTD. [2007 (1) TMI 5 - SUPREME COURT] it has been held by the Hon’ble Supreme Court that it is settled law that the department having accepted the principles laid down in the earlier case cannot be permitted to take a contra stand in the subsequent cases - It was therefore incumbent upon the Commissioner to follow the order dated 25.05.2004 of his predecessor, which had been accepted by the Department, and drop the proceedings in the instant case also, by following the principle of res judicata. The impugned order dated 27.03.2012 passed by the Commissioner of Central Excise, Haldia is set aside and the appeal of the appellant is allowed. Issues Involved:1. Reissuance of Show Cause Notice on the same issue.2. Violation of principles of natural justice.3. Requirement of reversal of credit on inputs in waste and scrap.4. Payment of duty on waste and scrap.5. Demand barred by limitation.6. Erroneous and inflated duty demand.Detailed Analysis:1. Reissuance of Show Cause Notice on the Same Issue:The appellant contended that an earlier Show Cause Notice (SCN) on the same issue for a part of the period involved was adjudicated and dropped by the Commissioner in an order dated 25.05.2004, which was accepted by the Department. The appellant argued that the Commissioner erred in taking a contrary stand in the present case on identical allegations/grounds, violating the principle of res judicata. The Tribunal agreed with the appellant, citing the Supreme Court's decision in CCE Vs. Novapan Industries Ltd., which established that the Department cannot take a contrary stand in subsequent cases once the principles have been accepted in an earlier case.2. Violation of Principles of Natural Justice:The appellant argued that they were not granted an opportunity for a personal hearing, rendering the impugned order violative of the principles of natural justice. The Tribunal did not explicitly address this issue in their decision, focusing instead on the substantive issues of the case.3. Requirement of Reversal of Credit on Inputs in Waste and Scrap:The appellant argued that there is no provision under Rule 4(5)(a) or Rule 4(6) of the Cenvat Credit Rules, 2002/2004, requiring reversal of credit on inputs in waste and scrap generated at the job worker's end. The Tribunal agreed, referencing several decisions, including Rocket Engineering Corporation Ltd. Vs. CCE and National Engineering Ind. Ltd. Vs. CCE, which held that no liability exists on the principal manufacturer for waste and scrap generated at the job worker's end post-1.4.2000.4. Payment of Duty on Waste and Scrap:The appellant contended that duty was paid on the waste and scrap generated at the job worker's end, which should render the demand unsustainable. The Tribunal found that the appellant had indeed paid duty on the waste and scrap based on the value of similar waste and scrap generated and sold from their factory. This method was previously accepted by the jurisdictional Commissioner in the order dated 25.05.2004. The Tribunal held that the Commissioner's contrary finding in the impugned order was erroneous.5. Demand Barred by Limitation:The appellant argued that the demand was barred by limitation, citing the principle laid down in ECE Industries Ltd. Vs. CCE and Nizam Sugar Factory Vs. CCE. The Tribunal did not explicitly address this issue in their decision, focusing on the substantive merits of the case.6. Erroneous and Inflated Duty Demand:The appellant contended that the duty demand was based on an inflated input price without disclosing the basis in the SCN, resulting in an inflated demand. The Tribunal did not specifically address the issue of inflated input prices in their decision.Conclusion:The Tribunal set aside the impugned order dated 27.03.2012 passed by the Commissioner of Central Excise, Haldia, and allowed the appeal with consequential relief. The Tribunal held that the appellant's method of valuation and payment of duty on waste and scrap was correct and previously accepted by the Department. The Tribunal also found that the Department could not take a contrary stand in the present case, following the principle of res judicata. The Tribunal's decision was based on established legal precedents and the CBEC Circular F.No.B-4/7/2000-TRU dated 03.04.2000, which clarified that CENVAT credit is admissible for inputs contained in waste, refuse, or by-products.