TaxTMI 
TaxTMI 
2017 (2) TMI 978
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....68,90,283/- on the clearance of waste of conveyor belts during the period of Sep. 1996 to Mar. 2001. The Show Cause Notice was adjudicated by the Commissioner who confirmed the duty of Rs. 68.90.283 on the appellants along with the interest and also imposed the equal amount of penalty under Section 11 AC of the Act. The appellants filed appeal before the Tribunal against this order and Tribunal vide its order dated 22.03.2006 allowed their appeal. Revenue challenged this order of the Tribunal before Hon'ble High Court of Bilaspur Chhatisgarh and the Court vide its order dated 23.11.2012 has remanded the case to this Tribunal as per observations made in Para 11,12,13 as under: 11. Since the issue is of frequent occurrence involving sizable amount of duty if found payable and hence we consider it apposite to remand of the case of the Tribunal for deciding the appeal afresh on merits strictly in accordance with law. Needless to say, the parties shall cite the entire case law on the subject including the relevant rules governing the issue while arguing the appeal before the Tribunal. 12. As a consequence of foregoing discussion, the appeal succeeds and is allowed.....
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.... B.N. Aggarwal authorized signatory of the appellant in his statement has stated that it was their bonafide belief that Excise duty was not payable on such waste and scrap. He relied upon decision of Hon'ble Gujrat High Court in case of GNFC limited reported in 2007 (214) ELT 18 (Guj.). He also relied upon decision of the Tribunal in case Hindustan Zinc Ltd. reported in 2009 (237) ELT 309 (Tri -- Del.) in support of his contention that duty on Waste/scrap is payable. 4. After hearing both the sides we find that issue involved in the appeal is whether duty is required to be paid on the waste and scrap of Conveyor belts on which the credit was taken by the appellants as capital goods. Rule 57S refers to the manner of utilization of the capital goods and the credit allowed in respect of duty paid there on. Rule 57S (2) reads as under: (2) In a case,- (a) Where capital goods are removed without being used from the factory for home consumption, on payment of duty, or for export on payment of duty of excise, such duty of excise shall in n case be less than the amount of credit that has been allowed in respect of such capital goods under rule 57Q; (b) Where cap....
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.... tyre, with a special machine, as close as possible to the tringle bead wires or the heel. (b) Splitting to remove the tread. (c) Cutting into pieces. On going through the HSN Explanatory Notes (2) we find that goods of rubber (other than hard rubber) definitely not usable as such because of cutting-up, wear or other reasons will be covered under 4004. This Heading 4004 includes worn-out rubber tyres not suitable for retreading and scrap obtained from such worn-out rubber tyres, by cutting the tyres, splitting etc. Similarly we are therefore of the view that Waste and Scrap of worn-out conveyor belt will also be covered in Heading 4004. 6. Ld. Advocate relied upon the decision of Tribunal and the Karnataka High Court in case of Mysore Cements Limited. In this case the Tribunal 2004(168) E.L.T. 307 (Tri-Bang.) in para 7 has held as under: 7. On considering the submissions made by both sides on this plea and in view of the fact that the Tribunal has already taken a view regarding scrap and waste arising in the course of dismantling of equipment will not be liable to duty, following the same, we hold that the same is not liable to duty and accord....
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....214) E.L.T. A23 (S.C.). The ratio of decision of Hon'ble Guj. High Court is squarely applicable to the present case as it relates to demand of duty Under Rule 57S (2) of the Rules. We therefore hold duty on waste of Scrap of Conveyor Belt is payable by the appellants. 7. As regards the issue of time bar the Show Cause Notice in this case was issued 17.10.2001 demanding the duty for the period Sep, 96 to Mar, 2001 invoking the extended period of limitation. We find that Shri. B.N Aggarwal the authorized signatory of the appellants in his statement dated 04.04.2001 stated that it was their bonafide belief that excise duty was not payable on such waste and scrap of conveyor belts. It is also fact that appellants did not file any classification as required under rule 173B of the Rule classifying such waste and scrap. They have also not mentioned anything in this regard in their RT 12 return. We therefore agree with finding or the Commissioner that the appellants had suppressed the clearances of such waste and scrap. Once the suppression of the fact is established against the appellants, extended period of limitation as well as penal provisions Under Section 11AC are inv....
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....n the part of the appellant to clear waste and scrap of used conveyor belts without payment of duty, I would like to discuss the leading decision of the Hon'ble Supreme Court on the subject. In the case of C.C.E. Vs. Chemphar Drugs & Liniments - 1989 (40) ELT 276 (SC), it was observed that"... Something positive other than mere inaction or failure on the part of the manufacturer or producer or conscious or deliberate withholding of information when the manufacturer knew otherwise, is required before it is saddled with any liability, before the period of six months Similarly, in the case of Padmini Products vs. C.C.E. - 1989 (43) ELT 195 (SC), the observations were that ".....These ingredients postulate a positive act. Failure to pay duty or take out a licence is not necessarily due to fraud or collusion or wilful mis-statement or suppression of facts or contravention of any provision of the Act. Suppression of facts is not failure to disclose the legal consequences of a certain provision. Shri Ganguly, appearing for the revenue, contended before us that the appellants should have taken out a licence under rule 174 of the said Rules because all the goods were not handicrafts and....
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....uty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression". In the case of Cosmic Dye Chemical vs. C.C.E. - 1995 (75) ELT 721 (SC), it was observed as under: " 6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a suppression or mis-statement of fact, which is not wilful and yet constitutes a permissible ground for the purpose of the proviso to Section 11A. Mis-statement or suppression of fact must be wilful. 7. Now coming to the facts of this case, the appellant's case is that he thought bona fide that he need not include the....
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....accordance with law ....." 12. List of such declaration of law by the Hon'ble Supreme Court is unending and I do not propose to refer to each and every judgment. The proviso to section 11A stands interpreted by the Hon'ble Apex Court. The Supreme Court in the above referred decisions has held that extended period of limitation is available to the Revenue only when there is willful misstatement or suppression of facts with intent to evade payment of duty. As such, the word "intent" is one of the ingredients for invocation of the longer period of limitation. Applying the above decisions of the Hon'ble Supreme court, to the facts of the present case, I find that both sides have agreed that the statement of Shri B.N. Aggarwal recorded_on 4.4.2001 clearly deposed that there was bona fide belief on their part that excise duty was not payable on such waste and scrap of conveyor belts. If that be so, I pose a question that where is the suppression and where the misstatement with intent to evade payment of duty is. The appellant is not engaged in the manufacture of rubber products and no waste and scrap arise during the course of rubber product. Admittedly, such waste a....
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....erpreting said provision of law in their favour. As such, I am of the view that in the absence of any positive action on the part of the appellant to suppress or mis-state any fact with intention to evade payment of duty, the longer period of limitation is not available to the Revenue. Otherwise also, I find that the appellants liability to clear waste and scrap, if at all, arisen in terms of provisions of Rule 57-S, which provides for a mechanism to mineralizing the credit taken to some extent. Admittedly, the appellant is not manufacturer of rubber waste & scrap and is not required to the same, in the ordinary course, on payment of duty. As such, there was no legal obligation on him to file the classification list, in the strict sense. As such, in any case non-filing of classification list can not lead to invocation of extended period. Otherwise also, and in any view of the matter, the appellant is a public sector undertaking and non-payment of duty will not benefit any individual. As such, it is difficult to hold, under evidence is available, that PSU had indulged into melafide suppression or mis-statement so as to justifiably invoke the longer period of limitation. For....
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....ed out the matter in appeal to the High Court at Bilaspur (Chhattishgarh), in Tax Appeal No. 27 of 2006. By the judgment dated 23.11.2012, Revenue's appeal was allowed. The High Court set aside the judgment of this Tribunal on the ground that it was laconic and remanded the matter for de novo determination. Relevant portions of the order of High Court are: "(10) In sum and substance, in our considered view, the Tribunal did not decide the issue in detail with reference to the facts of the case, the relevant rules and decided case law on the subject which have a bearing over the controversy and hence we can safely conclude by saying that impugned order is essentially a cryptic and unreasoned one and not liable to be sustained in this appeal. It does require a fresh look and in depth debate and discussion both on facts and in law in the light of relevant rules, the decided case law on the subject cited at the bar by both the sides and then to return a finding by the Tribunal as to whether assessee is liable to pay any excise duty on the items/goods in questions for which show cause notice was served on them or not and if held liable to pay then at what rate it is payable and i....
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....ded since the appeal requires to be allowed on the point of limitation. 5. Shri B.L. Narasimhan, Id. Counsel for the assessee submits, and rightly, that that only issue that falls for consideration before me is whether the conclusion of Member (Technical), that the extended period of limitation was rightly invoked or the contrary view by the learned Member (Judicial) that the extended period of limitation ought not to have been invoked represents the correct view. 6. It is however submitted by Id. Counsel that in view of the clear direction in the judgment of the High Court, there inhered a non-derogable obligation on this Tribunal to have recorded an operative conclusion on the substantive merits of the appeal. There is no such conclusive determination on the merits of the appeal since the Id. Member (Technical) has recorded a conclusion on merits but the Id. Member (Judicial) has not done so. It is therefore the contention of the Id. Counsel that the proper course is for the parties to make an application to the Id. Division Bench (which decided the matter) to request recording of an operative decision on the substantive merits of the appeal, to be recorded by t....
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.... has also been the ratio of the Hon'ble Gujarat High Court in the case of GNFC Ltd. Vs. UOI [2007(214) ELT 18 (Guj.)] as confirmed by Hon'ble Supreme Court reported as GNFC Ltd. Vs. UOI [2007(214) ELT A23 (SC)], as referred to by the learned Member(Technical) in his order. However as is seen from the said rule, the duty required to be paid by the assessee on the waste and scrap of such capital goods shall be the duty, which is 'leviable' on such waste and scrap. 4. The appellant's contention is that the conveyor belts, when sold, after being repeatedly used do not attract any duty of excise inasmuch as no such duty is 'leviable' on such used goods so cleared by them. Revenue has confirmed the demand of duty under heading 40.04 of Central Excise Tariff. The said heading stands reproduced by the learned Member(Technical) in his order. As is seen, the same refers to waste and scrap of rubber as defined in Note 6 to the Chapter note of the said chapter. The Revenue's contention is that the goods of rubber definitely not usable as such because of cutting up, wear or other reasons would fall under Chapter 40. 5. On the other han....
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....f item in the schedule for determining the applicable rate of duty and this note cannot be construded to have any deeming effect in relation to the process of manufacture as contemplated by Section 2(f) of the Central Excise Act, 1944. 8. Further I find that the Tribunal in the case of Mysore Cements Ltd. Vs. CCE, Bangalore [2004(165) ELT 307 (Tri. Bang.)] has held that the sale of old used material i.e. fire bricks and conveyor belts, furnace oil waste etc. would not attract any duty of excise. The said decision was arrived at by the Tribunal by relying upon the earlier decision of the Tribunal in the case of Hindustan Petroleum Corporation Ltd. Vs. CCE, Visakhapatnam [2002(144) ELT 555 ] as also the Tribunal decision in the case of CCE Vs. West Coast Industrial Gases Ltd. [1999(108) ELT 383 (Tri.)] and the confirmation of the said decision by the Hon'ble Supreme Court reported as CCE Vs. West Coast Industrial Gases Ltd. [2003(155) ELT 11 (SC)]. The said decision of the Tribunal in the case of Mysore Cements Ltd. was confirmed by the Hon'ble High Court of Karnataka. The said decision in the case of Mysore Cements Ltd. stands taken note of by my learn....
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....e and scrap which are sold by them in the market without payment of Central Excise duty." As such, it is clear from the above that the conveyor belts are cleared as used and worn out conveyor belts without converting the same into waste and scrap. A specific contention stands taken by the learned advocate that the appellant might treat the said old and used conveyor belts as waste for them but the same may be used by the buyers, after some reprocessing etc. as conveyor belts only, in which case it cannot be held that it is waste and scrap falling under Chapter 40. At the stage, a common life example coming to my mind is a used and worn out wooden chair. It may happen that one leg of the chair gets broken and the owner of the same may treat as a waste for himself and clear the broken chair, as such. The buyer of the chair may choose to get the leg refixed and use the chair as chair. The question is whether in such circumstances, the wooden chair has to be treated as scrap of wood or as chair only. The answer would be clear that the broken chair, cleared as chair and further usable as chair, is required to be treated as chair only and not as was....
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....nion which is referred reads Whether the demand raised by invocation of limitation period has to be upheld as held by the [d. Member (Technical) or the appeal has to be allowed on the point of limitation as held by the Id. Member (Judicial). Since on a consideration of the relevant chronology of events including those that have occurred subsequent to the above mentioned order indicate that there is an incomplete reference of the difference of opinion, I consider it appropriate to refer this matter to a Division Bench for framing a comprehensive difference of opinion arising out of the order dated 7.1.2013 and the subsequent order dated 21.1.2015 which is an order passed by the Id. Judicial Member (who was a Member of the Division Bench wherefrom the difference of opinion had originally arisen). 2. The substantive appeal was heard and initially a final order dated 22.3.2006 was passed by this Tribunal allowing the appeal preferred by the assessee. Aggrieved, Revenue preferred an appeal before the Hon'ble Chhattishgarh High Court at Bilaspur. By the order dated 23.11.2012, the matter was remitted for de novo determination by the Tribunal. 3. In terms of th....
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....opinion consequent on the divergence in the opinion of the Hon'ble Members comprising the Division Bench, the matter shall be listed before appropriate Division Bench. Notice of hearing by the Division Bench for facilitating framing of a comprehensive difference of opinion, shall be issued to the appellant. (Justice G. Raghuram) President Per B. Ravichandran :- In terms of interim order No. 58/2016 dated 30/06/2016 in Excise appeal No. 2298 of 2004 the following difference of opinion between Members of Central Excise Division Bench of Tribunal has been referred to the third Member for resolution. "Whether the appeal has to be allowed on merits as also on limitation as held by member (Judicial) OR the same has to be rejected on merits as also on limitation as held by Member (Technical)?" 2. The brief facts of the case are that M/s SAIL, Bhillai Steel Plant (appellant) are engaged in the manufacture of Iron and Steel products liable to Central Excise duty under Chapter 72 and 73 of Central Excise Tariff Act, 1985. They were availing facility of credit of Modvat on the duty paid on inputs and capital goods. Among other things, they had availed credit of duty paid....
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....s Limited vs. CCE, Bangalore reported in 2004 (165) E.L.T. 307 (Tri. - Bang.) by the Tribunal which was affirmed by the Hon'ble High Court of Karnataka in 2006 (206) E.L.T. 1179 (Kar.). (d) The demand in any case cannot be sustained for extended period. The appellants are a reputed public sector undertaking under the Government of India discharging hundreds of crores of Central Excise duty per year. There is no malafide intent in this case as the matter is involving purely interpretation of the provisions of Rule 57-S and classification of disputed product in Chapter 40. There can be no illicit motive to gain in a Government owned public sector undertaking. He relied on various case laws to support his submission on time bar. 5. The learned AR strongly contested the appellants submissions and also the views expressed by the learned Member (Judicial) in the interim order. He supported the findings recorded by the Hon'ble Member (Technical) both on merit as well as on time bar. The submissions made by learned AR on behalf of Revenue can be summarised as below : (i) The provisions of Rule 57-S as it existed during the material period are clear ....
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....nd scrap on the value of consideration received by them in terms of Rule 57-S of Central Excise Rules, 1944. Rule 57-S talks about manner of utilisation of capital goods and credit allowed in respect of duty paid thereon. During the year 1996-1997 second proviso to Rule 57-S (1) stipulated that " where such capital goods are sold as waste and scrap the duty leviable shall be at the rate applicable on such waste and scrap". Later the relevant provision under Rule 57-S (2) (c) read as "where capital goods are sold as waste and scrap the manufacturer shall pay the duty leviable on such waste and scrap". It is clear that during the material period the provision for payment of duty when the capital goods are sold as waste and scrap are inbuilt in the Rule as mentioned. It was argued on behalf of the appellant that since the appellants are not manufacturers of said waste and scrap there could be no "duty leviable" as Section 3 of the Act is applicable to only excisable goods produced or manufactured. I find the said contention is misplaced and misleading. The duty on waste and scrap, as mentioned under Rule 57-S is in specific situation where capital goods on which duty credit has been a....
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....relevant to refer to the decision of Hon'ble Gujarat High Court in GNFC Ltd. (supra) which was later affirmed by the Hon'ble Supreme Court. The reasoning of the Hon'ble High Court as reproduced below is squarely applicable to the facts of the present case : "4. The Tribunal has upheld the levy in light of Rule 57-S (2) (c) of the Rules. 5. On a plain reading of the said Rule, it is clear that where capital goods are sold as waste and scrap, the manufacturer is bound to pay the duty leviable on such waste and scrap. Clause (c) of sub-rule (2) of Rule 57-S of the Rules has to be read in light of clauses (a) and (b), which precede clause (c). It is apparent that the Rule does not deal with the capital goods as final products, but capital goods which are used for the purposes of manufacture. The contention on behalf of the appellant that waste and scrap can be amenable to duty only when it is generated in the process of manufacture, does not merit acceptance in light of the facts of the case, for the simple reason that the appellant is not a manufacturer of capital goods. In other words, the appellant does not manufacturer and sell capital goods, but uses ....
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....ppellant with an intention to evade payment of duty on such waste and scrap. The reason given in the impugned order for invoking extended period is not convincing. The order says that the appellants did not file due declaration under Rule 173B for manufacture, classification and clearance of such waste and scrap and also did not indicate said clearance in their RT-12 monthly returns. I find that the question of filing declaration or indicating in the monthly return regarding sale of waste and scrap of conveyor belts would not arise in view of bonafide belief entertained by the appellant as could be deduced from different interpretations followed by the Tribunal itself. There could be no substance in the allegation of fraud, suppression, wilful misstatement with an intention to evade payment of duty against the appellant in such a situation. 12. It is to be noted that the appellant is a public sector undertaking under the Government of India. They were discharging Central Excise duty to the tune of hundreds of crores per year. Reference can be made to the decision of the Tribunal in CCE, Allahabad vs. Bharat Yantra Nigam Ltd. reported in 2014 (36) S.T.R. 554 (Tri. - Del.) and in ....