Custom, Excise & Service Tax Tribunal
Shree Khedut Sahakari Khand Udyog ... vs Cce & St Vadodara-Ii on 14 November, 2017
In The Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad ~~~~~ Appeal No : E/11983,11778/2016 (Arising out of OIA No. CESA-VAD-APP-II-VK-200-2016-17 dated 29.08.2016, CESA-VAD-APP-II-VK-201-2016-17 dated 30.08.2016 passed by Commissioner (Appeals) of Central Excise, Customs and Service Tax-Vadodara-II) Shree Khedut Sahakari Khand Udyog Mandli Ltd: Appellant (s) Vs CCE & ST Vadodara-II : Respondent (s)
Represented by:
For Appellant (s) : Shri Rahul Gajera, Advocate For Respondent (s):Shri K. J. Kinariwala, AR CORAM :
Mr. Ashok Jindal, Hon'ble Member (Judicial) Date of Hearing/Decision:14.11.2017 ORDER No. 13465-13466/2017 Per : Mr. Ashok Jindal The appellants are in appeal against the impugned orders wherein duty on capital goods, in terms of Rule 3 (5A) of CCR, 2004 has been demanded from the appellants.
2. Heard the parties and considered the submissions.
3. The facts of the case are that the appellants are manufacturer of Sugar and Molasses. They procured capital goods and after use of the capital goods, certain waste arises and the waste and the said scrap was cleared without payment of duty. Therefore, the show cause notices were issued to the appellants for payment of duty on waste and scrap of the capital goods, in terms of Rule 3 (5A) of CCR, 2004. The matters were adjudicated, demand of duty was confirmed alongwith interest and penalties were also imposed. Aggrieved from the said orders, the appellants are before me.
4. Ld. Counsel for the appellant submits that it has not been classified under which rule they were required to pay duty, therefore, in the light of the decision of this Tribunal in the case of Shree Ganesh Khand Udyog Sahakari Mandli Ltd. Vs. CCE, Surat vide Final Order No. A/1152-1153/WZB/AHD/09 dated 29.05.2009, the duty cannot be demanded from the appellants. He also relied upon the decision of this Tribunal in the case of Shriram Alkali & Chemicals vs. CCE, Surat 2010 (259) ELT 77 (Tri. Ahmd.).
5. On the other hand, the Ld. AR for the Revenue submits that the appellant has not paid duty on waste and scrap, in terms of Rule 3 (5) of Cenvat Credit Rules, 2004 they are required to pay duty on waste and scrap of the capital goods
6. After considering the submissions of both sides, I find that this Tribunal in the case of Shri Ganesh Khand Udyog Sahakari Mandli Ltd (supra) has examined the issue and observed as under:-
4. I have considered the submissions made by both the sides. The annexure to the show cause notice clearly shows that the waste and scrap have not been classified and simply rate of duty has been indicated. I agree with the learned advocate that this is not the correct procedure. Further, I also find that the issue is covered by the decision of the Tribunal on the same issue in Kissan co-op. Sugar Factory Ltd. Vs. CCE, Meerut 2008 (226) ELT 196 (Tri-Del.). Accordingly, following the decision cited above, I allow the appeals with consequential relief to the appellants. Further, the issue has been examined by this Tribunal in the case of Shriram Alkali & Chemicals (supra). Wherein it has observed as under:-
2.?Learned advocate submitted that the waste and scrap consisted of several items such as brass scrap, used SS spindle, used filter for lube oil/change oil, MS/SS/Brass scrap etc. He submitted that in all these cases duty has been demanded at flat rate without classifying items and without determining rate of duty leviable thereon. He relied upon the decisions of the Tribunal in the case of M/s. Shree Ganesh Khand Udyog Sahakari Mandal Ltd. - Order No. A/1152-1153/WZB/AHD/09, dated 29-5-09, J.K. Industries Ltd. reported in 2004 (164) E.L.T. 332 (Tri.) and Indo Rama Synthetics (India) Ltd. v CCE, Nagpur reported in 2005 (190) E.L.T. 431 (Tri. - Mumbai). While we find that the decisions in J.K Industries Ltd. and Indo Rama Synthetics (India) Ltd. are not applicable on facts, the Tribunals decision in the case of Shree Ganesh Khand Udyog Sahakari Mandal Ltd. is directly applicable to facts. It was observed in that case that the relevant rule requires goods to be classified. The Rule 3(5A) of Cenvat Credit Rules provide that if capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. Therefore it becomes necessary to classify the goods. The next submission by the learned advocate was that the demand is for an amount equivalent to duty leviable as per the provision of Rule 3(5A) of Cenvat Credit Rules, 2004 and the learned advocate relied upon the decisions in the case of Pushpaman Forgings v. CCE reported in 2002 (149) E.L.T. 490 (Tri.) to support his contention that duty demand under Section 11A cannot be confirmed since Section 11A provides only for recovery of duty short paid or not paid etc. However all the decisions cited by the learned counsel relate to the payment of duty at 8% or 10% when a manufacturer was engaged in the manufacture of dutiable as well as exempted goods and did not maintain separate accounts. In the present case as rightly submitted by the learned counsel, goods have to be classified and duty amount has to be worked out which virtually means that goods are to be assessed to duty unlike the decisions referred to by him where rate of duty does not depend upon classification of the goods and rate of duty as per tariff. In such a situation it cannot be said that Section 11A would not be applicable. The next contention submitted by the appellant was that waste and scrap of metal generated out of dismantling of machinery are due to wear and tare of machine parts cannot be treated as excisable goods leviable to duty as waste and scrap as defined in note 8(A) of Section 15 of CETA 1985. According to note 8(A) of Section 15, waste and scrap would mean metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons. The words wear or other reasons would clearly show that capital goods which have worn out because of use and are being scrapped would be covered by this heading. However we find that in the case of India Cements Ltd. reported in 2006 (76) RLT 793, the Tribunal had taken a view that scrap which is generated from capital goods is not covered by this definition. Therefore following the principle of judicial discipline and in view of the fact that the learned advocate had cited several other decisions, we are bound by the above decision. In view of the fact that this waste and scrap are not covered by the definition and in any case department has not made any effort to classify the same, it has to be held that appellants have made out a very strong case in their favour. Further it was also submitted that substantial portion of the capital goods which have been sold as waste and scrap, were the ones on which credit has not been taken. As the issue has already been settled that without classifying the waste and scrap, duty cannot be demanded from the appellants. Therefore, the impugned orders are set-aside and it is held that the duty cannot be demanded from the appellants without classifying the waste and scrap of the capital goods.
7. In the result, both the appeals are allowed with consequential relief, if any.
(Dictated & Pronounced in the open court) (Ashok Jindal) Member (Judicial) G.Y. 4 Appeal No. E/11983,11778/2016