Custom, Excise & Service Tax Tribunal
M/S.Karnal Co-Operative Sugar Mills ... vs Cce, Panchkula on 23 November, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
Single Member Bench
Excise Appeal No.261 of 2009-SM
(Arising out of Order-in-Appeal No.243/ANS/PCK/2008 dated 31.10.2008 passed by the CCE(A), Panchukla)
Date of Hearing/Decision: 23.11.2010
For approval and signature:
Honble Mr.M.Veeraiyan Member (Technical)
1
Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2
Whether it should be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3
Whether Their Lordships wish to see the fair copy of the Order?
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Whether Order is to be circulated to the Departmental authorities?
M/s.Karnal Co-operative Sugar Mills Ltd. Appellant
Vs.
CCE, Panchkula Respondent
Present for the Appellant : Shri V.R.Sethi,, Advocate
Present for the Respondent: Shri I.Baig, DR
Coram:
Honble Mr.M.Veeraiyan, Member (Technical)
ORDER No.____________/
PER: M.VEERAIYAN
This is an appeal against the order of the Commissioner (Appeals) No. 243/ANS/PCK/2008 dated 31.10.2008.
2. Heard both sides.
3. The relevant facts of the case, in brief, are that the appellants are manufacturers of sugar and molasses. There was audit during the February, 2005 during which records relating to the year 2003-04 was examined and objection was raised stating that the appellants have cleared the scrap of iron and steel and the scrap of brass falling under chapter 7204.90 and 7404.90 respectively and the duty of Rs.2,25,082/- was payable which was communicated to the appellants by a letter dated 27.4.05 issued by the Superintendent. The enclosure to the said letter gives the description of the goods as M.S. Pipes scrap, M.S. Heavy Scrap, used brass tube scrap, used nickel scrap, brass tube scrap, used boiler tube etc. The appellants gave reply dated 19.5.05 claiming that the said scrap has not arisen out of manufacturing of excisable goods. The Superintendent writes further letter dated 30.8.05 sought for clarification as to the goods from which the scrap has arisen. Further communication dated 8.9.05 was given by the appellants claiming that the scrap sold by them during 2003-04 was arising out of the capital goods installed prior to the crushing season 1989-90 and that since they related to the much earlier period, they did not have documents at this stage. A show cause notice was issued on two grounds that the appellants are liable to pay on the waste and scrap as excisable goods in terms of clarification contained in para 3.2 of chapter 5 of supplementary instructions of CBEC and further in the absence of evidence indicating that the scrap has arisen out of the capital goods procured prior to the introduction of Cenvat Credit Rules on the capital goods, the appellants are required to pay an amount equal to the excise duty in terms of sub-rule (5A) of Rule 3 of Cenvat Credit Rules. The original authority confirmed the demand of duty and imposed equal amount of penalty and the order of the original authority stands upheld by the Commissioner (Appeals). Duty and interest involved stands paid on 19.3.07 and it was submitted that the appellants have filed refund claim in December, 2007 and the same is pending decision.
4. Learned Advocate for the appellants submits that the burden to prove excisability is on the department. The items on which the duty is demanded are not goods arising out the manufacture of any fresh goods. In other words, the department has not discharged the burden to prove that the goods cleared by them as waste and scrap during 2003-04 are arising out of the manufacture of final product which are excisable.
5. Learned Advocate alternatively submits that the scarp and waste cleared by them are arising out of capital goods installed prior to 1989-90. Even though they were not able to produce the documents relating to procurement and installation of the capital goods out of which these waste and scrap has arisen, the clearances having been made during 2003-04, the question of demanding any amount in terms of Rule 3 (5A) of Cenvat Credit Rules does not arise. In support of this proposition, he relies on the decision of the Tribunal in the case of Triveni Engineering & Industries Ltd. vs. CCE, Meerut-II reported in 2008 (84) ELT 78, decision in the case of CCE, Mangalore vs. MRPL reported in 2008 (222) ELT 220 and also decision in the case of CCE, Pondicherry vs. Rajshree Sugar & Chemicals reported in 2008 (87) ELT 611.
6. Learned SDR submits that the emergence of the waste and scrap especially in the sugar mills is a continuous process. The appellants have failed to produce any evidence that they have not taken credit on the capital goods. Further, they have not given any break up as to whether any scrap and waste has arisen during the course of manufacture of parts/ accessories for replacing worn out parts in the sugar mills. Relying on the decision of High Court of Rajasthan in the case of Union of India vs. Grasim Industries Ltd. reported in 2008 (229) ELT 328, particularly paras 23, 24 and 25, he submits that when the scarp is generated in the fabrication of any part in connection with repair and maintenance, the same is dutiable.
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 absence of such evidence having been relied upon, the issue requires to be considered in the light of the second allegation that the goods have been cleared as waste and scrap have arisen out of capital goods on which the appellants have taken the credit. Admittedly the appellants were not able to produce documents on the ground that they relate to very old period. However, the submissions of the learned Advocate that prior to the amendment dated 16.5.05 to Rule 3 of Cenvat Credit Rules introducing sub rule 5A no amount is payable on waste and scrap arising out of capital goods even if the credit had been taken requires to be accepted. In this regard, sub rule 5A of Rule 3 of the Cenvat Credit Rules which was introduced on 16.5.05 reads as under:
5A if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.
7. The above provision does not treat the waste and scrap as manufactured goods. It stipulates that the manufacturer who has availed capital goods credit, when clearing the capital goods as scrap, an amount equal to the duty leviable on the transaction value of waste and scrap shall be payable.
8. At this stage, learned DR sought for time to look for legal provisions relating to the recovery of the amount on the capital goods cleared as waste and scrap. Accordingly, the matter is passed over.
9. When the matter was resumed, after lunch break, learned SDR dew my attention to the proviso to sub rule 5 of Rule 3 relating to the removal of the capital goods after the same was put to use. He fairly concedes that the same does not relate to the clearance of capital goods as waste and scrap.
10. In view of the above, I hold that the department has not adduced any evidence relating to the allegation of manufacture of excisable goods and therefore the entire goods should be treated as clearance of waste and scrap which has happened prior to 16.5.05 and therefore there is no liability to duty or payment of amount as per Rule 3 (5A) of Cenvat Credit Rules.
11. In view of the above, the orders of the authorities below are set aside and the appeal is allowed with consequential relief as per law.
(Dictated and Pronounced in the open court)
(M.VEERAIYAN)
MEMBER (TECHNICAL)
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