TaxTMI 
TaxTMI 
2024 (5) TMI 1329
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...., 1944. 3. I also impose a penalty of Rs 23,41,795/- under Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. 2.1 Appellant is engaged in manufacture of V P Sugar and Molasses falling under Chapter 17 of the First Schedule to Central Excise Tariff Act, 1985. They are also availing the CENVAT Credit of duties paid on inputs and capital goods. 2.2 Examination of sale-challans, balance sheets and Trial Balance for the period June 2006-December 2009, revealed that appellant had sold scrap generated from working capital goods, total valued at Rs 1,52,63,682/- without paying an amount equal to the duty leviable on the said transaction value in contravention of the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004. 2.3 Appellant has not maintained any record/ inventory in respect of production generation and clearance/ sale of waste & scrap arisen out of Capital goods separately nor paid due duty thereon. They also did not mention about these transactions in their reports/ returns submitted to the department from time to time. Thus they have willfully suppressed the facts of sale of waste and scrap generated out of ....
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....June 06 to December' 09 but they did not pay Central Excise Duty amounting to Rs.23,41,795/- liable to be paid by them. The appellants have contested the aforesaid allegation and in this regard the thrust of the appeal is that -(1) for levy of duty on sale of waste & scrap of capital goods, the essential ingredient such as emergence of waste as a result of any manufacturing process or mechanical working on capital goods on which Cenvat credit had been taken was absent in the allegation (2) no evidence had been adduced by the department to prove that waste & scrap arose from the capital goods on which Cenvat credit was taken. 6. It is observed that the adjudicating authority in the impugned order, has held that- "....Thus it is obvious that until and unless the party proves that the waste and scraps to be sold are arisen out of non-cenvatable capital goods they have to pay the duty thereon." (p-5) 7. I find that the sale of waste & scrap of capital goods is not under dispute. Regarding leviability of duty on such sold waste and scrap, I shall visit the Notification No.27/2005-CE(NT) dated 16.05.2005, whereby, sub-rule(5A) was inserted in Rule 3 of the ....
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....pital goods. On the other hand they put the argument- '..the waste / scrap were generated from dismantling of the plants and machines which were installed when Modvat / Cenvat scheme on capital goods was not provided" but have failed to bring anything concrete in support of their contention. Thus the contention is not tenable and so not acceptable. Hon'ble Tribunal in the case of Steel Authority of India Limited Vs. Commissioner, Central Excise, Raipur [2007 (208) E.L.T. 367 (Tri. - Del.)] observed "The adjudicating authority concluded against the appellant by observing that they have failed to produce any supporting documentary evidence regarding the period/duration of use of such CI/ Steel Rolls before the sale/removal of the same as waste and scrap. .. ........... This could be proved by the appellant from the documentary records maintained by them for the said purpose or from the buyers, who have purchased the same and the use to which the same has been put to. Admittedly no efforts have been made by the appellant to substantiate their claim of the said capital goods having become waste and scrap." [Emphasis supplied] 8.1 I observe that the necessary d....
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....n which Cenvat credit were not availed through any documentary evidence. Further, the specific description of items were not provided in the concerned bills of sold scrap to determine their origin and thus it was not practically viable to ascertain whether sold scrap belongs to non-cenvatable capital goods." (p-4) The adjudicating authority has further observed that, "The department proved that the party sold the waste and scrap and took the evidence of balance sheet for that fact. It is obvious that the preparation of balance sheet cannot be done without base records. There must be document relating to issue of scrap to the store, store records to take the scrap in store, issue of scrap from the store for sale and figures calculation of whole year for preparation of balance sheet etc. These records were utilized for preparation of balance sheet which were basis to show the origin of scraps but the party suppressed these documents" "The party was liable to produce such documents/ records to be exonerated from the payment of Govt. money in terms of section 104 of the Evidence Act which provides as under:- Burden of proving fact to be proved evidence admiss....
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....nt's intent to evade payment of central excise duty. 10 I find the following observations as in the case of R.B.M.P. Mills Ltd. Vs. Collector, C.Ex, Aurangabad reported in 1998(98) E.L.T. 246 (Tri.) "4. Since the appellants have not substantiated any of the contentions raised by them in the appeal memo particularly about pre-modvat scheme stock of scrap we do not see any warrant to interfere with the impugned order and accordingly uphold the same." Further, in the case of M/s GNFC Ltd. v. Union of India reported in [2007 (2i4) E.L.T. A23 (S.C.)] "Where capital goods are sold as waste and scrap, the manufacturer is bound to pay the duty leviable on such waste and scrap." support the case of the department." 4.3 Undisputedly the show cause notice records the contention of the appellant, in the following words: "Whereas the party vide their letter dated 11.01.2010 have stated that the excise duty is not payable on the sold scrap as it was the scrap arising out of capital goods on which no Cenvat credit had been availed as the sold scrap were under generic names of Heavy and Japani which were consisted of miscellaneous items arising o....
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....o Cenvat Credit was taken. Revenue authorities should have investigated the matter to establish to the contrary. Instead of doing so the show cause notice has been issued stating that it is immaterial whether the CENVAT Credit on the capital goods has been taken or not. Once Commissioner (Appeal) concluded that Rule 3 (5A) is applicable only to the Cenvated Capital goods, he should have dropped the proceedings initiated by this show cause notice. 4.6 Delhi bench has in the case of Karnal Co-Operative Sugar Mills Ltd. [2011 (265) E.L.T. 236 (Tri. - Del.)] held as follows: "6. I have carefully considered the submissions made from both sides and perused the records. The demand has been sustained on two grounds which are overlapping. The show cause notice alleges that the goods cleared by them are excisable. It also alleges that the goods cleared as waste and scrap has arisen out of capital goods on which credit has been taken. No attempt has been made to segregate the goods under each of the above categories. It suffices to say that in respect of allegation regarding manufacture of excisable goods, the burden of proof is on the department to adduce the evidence. In the abs....