TaxTMI 
TaxTMI 
2022 (9) TMI 1339
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....support service of business or commerce [BSS]. 3. For providing the output service of BSS, the appellant purchased various capital goods namely lead acid batteries, air conditioners, transmission racks, fire alarms, smoke detectors. and availed CENVAT credit thereon. The credit availed on capital goods were utilized by the appellant in discharging the output service tax liability. 4. The appellant, thereafter, removed certain capital goods after their usage which were waste/scrap. At the time of removal, neither credit was reversed, nor any amount was paid as the appellant believed that there was no requirement of payment/reversal by an output service provider under rule 3(5A) of the CENVAT Credit Rules 2004 [the Credit Rules] during the relevant period. However, with respect to capital goods which were removed as used capital goods, the appellant paid the amount in terms of rule 3(5A) of Credit Rules. 5. For the purpose of determination of nature of capital goods as 'used capital goods' or 'waste/scrap', the appellant followed the following procedure: (i) When capital goods become unworkable after continuous usage, appellant undertakes internal checks or tests fo....
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....tteries after 3-4 years of use as 'scrap battery cell' where in fact such battery were actually 'used battery cells'; and (iv) That the appellant has cleared these batteries even before the useful life of these batteries, as per the industry standards. 8. The appellant submitted a reply dated 29.01.2016 to the show cause notice and asserted that it was not required to pay any amount in terms of rule 3(5A) of Credit Rules on clearance of capital goods as scraps, and therefore, the show cause notice was liable to be dropped. 9. However, the Additional Director passed the order dated 29.07.2016 confirming the proposed demand of Rs. 83,00,29,670/-, with interest and penalty. 10. Shri B.L. Narasimhan learned counsel for the appellant assisted by Ms. Poorvi Asati, submitted that the issues in the present case are squarely covered by the decision of this Tribunal in M/s Bharti Infratel Limited v/s Additional Director General, DGCEI, New Delhi [2022 (2) TMI 9- CESTAT NEW DELHI] 11. Learned counsel also submitted that the extended period of limitation for the period 01.03.2011 to 16.3.2012 and 27.09.2013 to 31.03.2014 could not have been invoked in the facts and circums....
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.... Between 17.03.2012 to 26.09.2013 Rule (5A): If the capital goods, on which CENVAT credit has been taken, are removed after being used, whether as capital goods or as scrap or waste, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:- (a) for computers and computer peripherals: for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @ 5% for each quarter in the fourth and fifth year @ 1% (b) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter: Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value. 4. From 27.09.2013 Rule (5A) (a) If the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufactur....
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....g the period involved in the present appeal for clearance of capital goods as scrap. 17. This position has also been accepted by the Additional Director in the impugned order as would be evident from paragraphs A.3.7, A.3.11, A.4.3 and A.5.1. and they are reproduced: " A.3.7. On going through the provisions of CCR, 2004, I find that there is no provision for payment of any 'amount' on clearance of capital goods as 'waste and scrap' by a service provider during the two periods in question here i.e. during 27.02.2010 to 16.03.2012 and during the period from 27.09.2013 and onwards. But which capital goods can be considered as 'waste and scrap' is an important aspect here, which needs consideration. A.3.11. In find from the said provisions that during the 1st period in question here i.e. from 27.02.2010 to 16.03.2012 and during the third or last period in question here i.e. with effect from 27.09.2013, payment of amount on removal of 'waste and scrap' capital goods by a service provider has been omitted. A.4.3. I fully agree with the above contention of the Noticee, that in the situation of clearance of Capital goods as 'waste and scrap' by a service provi....
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.... to whether the said goods could be repaired or not. The appellant has stated that if the goods could be repaired they were removed as used capital goods and payment in terms of rule 3(5A) of the Credit Rules was made but if the capital goods could not be repaired and were declared as scrap, the appellant had decided to clear them as scrap. 36. The Additional Director also relied upon the definition of scrap as given in Explanation (b) of section 206C of the Income Tax Act, 1961, wherein scrap has been defined as a waste generated out of manufacture or mechanical working of materials and is not usable as such due to breakage, cutting, wear and other reasons. 37. The definition of 'scrap' in the Income Tax Act could not have been resorted to by the Additional Director as it was defined in a different context. The term 'scrap' has been used in the Income Tax in the sense of a waste by-product generated during the manufacturing, but the Credit Rules envisage clearance of capital goods in the form of 'scrap' when the same can no longer be used. 38. This apart, in case a term has not been defined in a particular Statue, reference can always been made to ....
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.... breaking the items. It may be true that a particular item was declared a scrap before the usual prescribed shelf life of that item, but that would not mean, in view of the detailed procedure undertaken by the appellant for declaring a particular item as scrap, that a particular item cannot be considered as scrap. What has actually to be determined is whether that item can be treated as scrap and it is not material whether the particular item still has a shelf life. The items which were declared as scrap were sold to companies specializing in scrap management and these companies have also been granted a certificate for procurement and recycling of scrap under the Hazardous Waste Management Rues. The appellant, therefore, could not have undertaken the process of breaking the items and it cannot be urged that these items would not be scrap merely because they have not been broken before disposal. 42. The inevitable conclusion that follows from the above discussion is that the capital goods cleared as 'scrap' by the appellant are scrap and, therefore, the appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules....