2017 (3) TMI 365 - AT - Central Excise

Tribunal remands duty demand on Iron waste clearance for further verification, emphasizes link with CENVAT credit

Sahakari Khand Udyog Mandal Ltd. Versus C.C.E. & S.T. -Daman

The Tribunal set aside the demand for duty on the clearance of Iron waste and scrap, remanding the case for further verification. It emphasized the need ... Valuation - scrap - Iron and scrap is generated out of the capital goods installed in the factory - whether clearance of Iron waste and scrap after 16.06.2005 alleged to be generated out of capital goods on which CENVAT Credit availed, be subjected to duty on its transaction value or otherwise? - Held that: - though the appellant has been vehemently arguing that they had received the 3333 MTs of M.S. Angles, Channels, Beams, Nut Bolts etc, during the period 1986-87 to 2006-07, and used in the maintenance of the plant and machinery for replacement of worn out parts, and the worn parts were removed as waste and scrap of 1930MTs, the said facts had not been verified. No doubt the onus lies on the department to establish that the waste and scrap did arise out of the capital goods on which credit availed, but, in the present case, the evidences adduced by the appellant in establishing the fact no CENVAT credit had been availed on such M. S. Angles, Channels, Beams, Nut Bolts etc., used in the repair and maintenance of the worn out parts of the plant and machinery, and the worn out parts were cleared as waste and scrap, needs to be verified, before confirming the duty on transaction value of waste and scrap under Rule 3(5A) of CCR,2004 - appeal allowed by way of remand. Issues:- Duty liability on clearance of Iron waste and scrap- Application of Rule 3(5A) of CCR, 2004- Verification of CENVAT credit on capital goodsAnalysis:Issue 1: Duty liability on clearance of Iron waste and scrapThe case involved an appeal against the confirmation of demand for duty on the clearance of Iron waste and scrap by the appellants without payment of duty. The dispute arose from the allegation that the waste and scrap were generated from capital goods, leading to the issuance of a show cause cum demand notice. The Ld. Advocate for the appellant argued that the waste and scrap cleared were from worn-out parts, not linked to availed CENVAT credit on capital goods. The contention was supported by references to relevant tribunal decisions. The Revenue argued that duty was rightly demanded based on Rule 3(5A) of CCR, 2004, emphasizing the need for evidence linking the waste and scrap to availed CENVAT credit on capital goods.Issue 2: Application of Rule 3(5A) of CCR, 2004The Tribunal examined Rule 3(5A) of CCR, 2004, inserted w.e.f. 16.06.2005, which mandates duty payment on the transaction value of waste and scrap derived from availed CENVAT credit on capital goods. The rule applies when waste and scrap of capital goods are cleared from the factory. The Tribunal highlighted the necessity to establish the link between availed CENVAT credit on capital goods and the waste and scrap generated. The appellant's claim of not availing CENVAT credit on specific items used for repair and maintenance was raised for the first time during the appeal, requiring verification of facts.Issue 3: Verification of CENVAT credit on capital goodsThe Tribunal emphasized the importance of verifying whether CENVAT credit had been availed on the capital goods that later became waste and scrap. While acknowledging the department's onus to prove the link between waste and scrap and availed credit, the Tribunal stressed the need to examine the evidence presented by the appellant regarding the non-availment of CENVAT credit on specific items used for maintenance. The case was remanded to the original adjudicating authority for further verification and assessment of evidence.In conclusion, the Tribunal set aside the impugned order and allowed the appeal by way of remand for a detailed examination of the evidence regarding CENVAT credit on capital goods and its connection to the clearance of waste and scrap.