Custom, Excise & Service Tax Tribunal
M/S. Balakrishna Industries Ltd vs C.C.E.&S.T., Alwar on 25 January, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
WEST BLOCK NO.2, R.K. PURAM, NEW DELHI 110 066
Date of Hearing 25.01.2016
For Approval & Signature :
Honble Mr. R.K. Singh, Member (Technical)
1.
Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
No
2.
Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
Yes
3.
Whether Lordships wish to see the fair copy of the order?
Seen
4.
Whether order is to be circulated to the Department Authorities?
Yes
Appeal Nos. E/53260 & 53237/2015-EX[SM]
[Arising out of Order-in-Appeal No.377-378(SLM)CE/JPR/2015, dated 19.06.2015 passed by the C.C.E.&S.T.(Appeals), Jaipur]
M/s. Balakrishna Industries Ltd. Appellant
Vs.
C.C.E.&S.T., Alwar Respondent
Appearance Ms. Sukriti Das, Advocate - for the appellant Mr. G.R. Singh, DR - for the respondent CORAM: Honble Mr. R.K. Singh, Member (Technical) Final Order Nos.50154-50155/2016, dated 25.01.2016 Per Mr. R.K. Singh :
These appeals are filed against respective Orders-in-Appeal, which upheld the respective Orders-in-Original. The issue involved in these appeals is the leviability of duty of MS scraps generated during the repairs of capital goods.
2. The brief facts of the cases as under:-
The appellant, manufacturer of automobile tyres purchased items falling under Chapters 72 and 73 like pipes, tubes, nuts, bolts, tools, etc. that are normally used for replacing of spare and parts of capital goods or repair and maintenance purpose and the MS scrap so generated would have certainly some portion such replace part and therefore the appellant was required to pay appropriate duty equal to CENVAT credit (relating thereto taken earlier) in terms of sub-rule 5A of Rule 3 of CENVAT Credit Rules, 2004.
3. Ld. Advocate for the appellant has contended that the scrap generated during the repair is out of the material on which no credit was taken. He cited the judgement of the Honble Supreme Court in the case of Grasim Industries Ltd. Vs. Union of India [2011 (273) ELT 10 (SC)].
4. Ld. Departmental Representative on the other hand reiterated the contentions contained in the impugned orders.
5. Heard both the parties and perused the records.
6. Sub-rule 5A of Rule 3 states as under:-
If the capital goods, on which CENVAT credit has been taken, are removed after being used, whether the capital goods or as scrap or as waste, the manufacturer or provider of the output service 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;
(b) for Capital goods, other than 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 transactional value, the amount to be paid shall be equal to the duty leviable on transactional value The appellant has stated that the in the scrap was generated during the repair of machines and the goods used for repairing were those on which no CENVAT credit was taken and therefore Rule 3(5A) is not applicable as no capital goods or the scrap thereof was removed. I find that in the case of Grasim Industries Ltd. Vs. Union of India (supra), the Honble Supreme Court observed as under:-
14.?In the present case, it is clear that the process of repair and maintenance of the machinery of the cement manufacturing plant, in which M.S. scrap and Iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is the excisable end product, as since welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end product. The issue of getting a new identity as M.S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end product. Therefore, the M.S. scrap and Iron scrap cannot be said to be a by-product of the final product. At the best, it is the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. Thus, it is evident that the scrap generated during the repair of capital goods is not liable to excise duty, more so when no credit was taken on the goods used for repairs.
7. I find that in the Show Cause Notices it is stated that the impugned MS scrap (light) would have certainly some portion of replaced parts (of capital goods) and therefore the assessee was required to pay appropriate amount (CENVAT credit) in terms of Rule 3(5A) ibid on clearance. Evidently it is too vague a basis to sustain the impugned demand in-as-much-as it is not identified whether there was indeed any portion of the capital goods cleared as scrap nor any quantification thereof done. No demand can be sustained on the basis of such vague unquantified premises based on assumption/presumption. The onus was clearly on Revenue to establish that the impugned scrap was of the capital goods on which credit was taken and such onus has not been discharged; the Show Cause Notice only states that some portion of the scrap would have been of the capital goods and such a statement by itself, is totally inadequate to sustain the impugned demand, even more so when the appellant has contended that the impugned scrap was generated from the material on which no credit was taken.
8. In the light of the foregoing analysis, I do not find any merit in the impugned orders and therefore the same are set aside and the appeals allowed.
(R.K. Singh) Member (Technical) SSK -5-