Custom, Excise & Service Tax Tribunal
Digvijay Cement Company Limited vs Rajkot on 24 June, 2024
Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad
REGIONAL BENCH-COURT NO. 3
EXCISE Appeal No. 10613 of 2013 - DB
(Arising out of OIO-84/COMMR/2012 dated 27/12/2012 passed by Commissioner of
Central Excise-RAJKOT)
Shree Digvijay Cement Company Limited ........Appellant
Digvijaygram,
Village : Sikka
Jamnagar, Gujarat
VERSUS
Commissioner of Central Excise
and Service Tax,-Rajkot ......Respondent
Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat- 360001 WITH EXCISE Appeal No. 10614 of 2013 - DB (Arising out of OIO-85/COMMR/2012 dated 27/12/2012 passed by Commissioner of Central Excise-RAJKOT) Shree Digvijay Cement Company Limited ........Appellant Digvijaygram, Village : Sikka Jamnagar, Gujarat VERSUS Commissioner of Central Excise and Service Tax,-Rajkot ......Respondent Central Excise Bhavan, Race Course Ring Road...Income Tax Office, Rajkot, Gujarat- 360001 APPEARANCE:
Shri Vikas Mehta, Consultant for the Appellant Shri Sanjay Kumar, Superintendent (AR) for the Respondent CORAM: HON'BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON'BLE MEMBER (TECHNICAL), MR. C L MAHAR Final Order No.11402-11403/2024 DATE OF HEARING: 29.02.2024 DATE OF DECISION: 24.06.2024 RAMESH NAIR These appeals are filed by the appellant challenging the confirmation of demand of Cenvat Credit in terms of Rule 3(5) of Cenvat Credit Rules, 2004 on waste and scrap arising from broken machines and equipments
2|Page E/10613-10614/2013-DB (capital goods). The case of the department is that the appellant is liable to pay duty under Rule 3(5) of Cenvat Credit Rules, 2004 in respect of the waste and scrap of capital goods.
2. Shri Vikas Mehta, Learned Consultant appearing on behalf of the appellant at the outset submits that the appellant right from the beginning has clearly submitted that this machine is as old as used during 1949 to 2001-02 and no Cenvat Credit was availed on such capital goods. It is his submission that these categorical statement has not been negated by the department. Therefore, in the fact that appellant has not taken Cenvat credit on receipt of capital goods which was used from to 1949 to 2001-02, there is no question of demanding duty/Cenvat Credit under Rule 3(5) of Cenvat Credit Rules, 2004. He submits that on identical facts the issue involved in this Tribunal's decision in the case of Shreno Ltd Vs. C.C.E. & S.T.-Vadodra-I-2024 (2) TMI 251-CESTAT Ahmedabad set aside the demand and allowed the appeal.
3. Shri Sanjay Kumar, Learned Superintendent (AR) appearing on behalf of the Revenue reiterates the finding of the impugned orders.
4. We have carefully considered the submission made by both the sides and perused the records. We find that the department has demanded the duty on the waste and scrap of capital goods invoking Rule 3(5A) of Cenvat Credit Rules, 2004 which reads as under:-
"Rule (5) When inputs or capital goods, on which CENVAT credit has been taken, are removed as such from the factory, or premises of the provider of output service, the manufacturer of the final products or provider of output service, as the case may be, shall pay an amount equal to the credit availed in respect of such inputs or capital goods and such removal shall be made under the cover of an invoice referred to in rule 9:
3|Page E/10613-10614/2013-DB Provided that such payment shall not be required to be made where any inputs [or capital goods] are removed outside the premises of the provider of output service for providing the output service :
[***] [Provided further that such payment shall not be required to be made where any inputs are removed outside the factory for providing free warranty for final products :] [* * * * * *] [Rule (5A) (a) If the capital goods, on which CENVAT credit has been taken, are removed after being used, 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 :-
(i) 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%
(ii) 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.
(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.]"
From the above Rule, it can be seen that provisions of Sub-Rule 5(A) is applicable for clearance of waste and scrape of the capital goods, only when the assessee has taken the Cenvat Credit on capital goods which has been converted into waste and scrape after prolonged use of the such capital goods. In the present case neither the show cause notice nor the Adjudication order has brought any evidence on record that the appellant have taken the Cenvat credit on the capital goods which has become waste and scrap and cleared by the appellant from their factory. In the absence of
4|Page E/10613-10614/2013-DB the fact that the appellant has taken the Cenvat credit on capital goods the demand under Rule 3(5A) cannot be sustained.
4.1 Moreover, form the fact which is not under dispute that the capital goods cleared as waste and scrape were in use from 1949 to 2000-01. It is very obvious that in the year 1949, there was no provision of Modvat Credit or Cenvat credit on the capital goods. For this reason also the benefit of doubt clearly goes in the favour of the assessee as no Cenvat credit on capital goods during the period of 1949 onwards has been taken. For this reason also the demand under Rule 3(5A) of Cenvat Credit Rules, 2004 is not sustainable. The Learned Counsel has rightly taken the support of this Tribunal judgment on the identical fact in the case of Shreno Ltd (supra) wherein the following order has been passed:-
"4.1 We have carefully considered the submissions made by both the sides and perused the records. We find that the main issue to be decided in the present case is whether the cost of corrugated boxes supplied by the buyer is includible in the computation of Assessable Value of the appellant's final product as per section 4 of the Central Excise Act 1944. The lower authorities have reiterated that the Assessed Value should include the cost of packaging. In the present case we are of the view that the cost of corrugated boxes supplied by the buyers to the appellant is includible in the transaction value of the glassware manufactured and supplied by the appellant as per the provision of Section 4 of the Central Excise Act 1944 and the rules made thereunder.
4.2 As regards the judgment in the case of M/s Transpek Industry Ltd., decided by this tribunal, we find that the entire case was decided on the fact that the packing material i.e the use of empty gas cylinders was limited to use for transportation purposes only and was not necessary for marketing the goods whereas for the Appellant, the corrugated boxes form part of Primary packaging for the glass ware manufactured and it cannot be said that it was only used for transportation purposes. Therefore, the facts of Transpek (supra) are completely different from the instant case.
4.3 We rely on this tribunal's order in Excise Appeal No. 423 of 2012 in the case of M/s. Kaira Can Company Limited vide Final Order No. A/12297- 123226/2019 dated 02.12.2019. The relevant portion of the above decision in reproduced below:-
"10. In this regard, on going through all the judgments and the statutory provision, we find that as far as inclusion of cost of packing material supplied free of cost for the purpose of packing of final product by the appellant there is no ambiguity in the law. For ease of reference, we reproduce the new Section 4.
5|Page E/10613-10614/2013-DB "1[4. Valuation of excisable goods for purpose of charging of duty of excise.-
(1) Where under this Act, the duty of excise is chargeable on any excisable goods with reference to their value, then, on each removal of the goods, such value shall-
(a) in a case where the goods are sold by the assessee, for delivery at the time and place of the removal, the assessee and the buyer of goods are not related and the price is sole consideration for the sale, be the transaction value;
(b) in any other case, including the case where the goods are not sold, be the value determined in such manner as may be prescribed. 2[Explanation - For the removal of doubts, it is hereby declared that the price - cum - duty of the excisable goods sold by the assessee shall be the price actually paid to him for the goods sold and the money value of additional consideration, if any, flowing directly or indirectly from the buyer to the assessee in connection with the sale of such goods, and price - cum duty, excluding sales tax and other taxes, if any, actually paid, shall be deemed to include the duty payable on such goods.]"
10.1 From the above section 4 it can be seen that only in cases where the transaction value is sole consideration such transaction value shall be the Assessable Value for charging Excise Duty. However, in the present case apart from the transaction value the packing material supplied Free of Cost by the customer was also used by the appellant. The value of such packing material was not included. When any Excisable product is manufactured and cleared the value of such goods shall be the total value of goods in the form it is cleared from the factory of the Assessee. It is immaterial that whether a part of the material contained in the final product to borne the cost.
As regard the heavy reliance placed on the Hon'ble Supreme Court Judgement in case of Grasim Industries Ltd. (supra) the Lager Bench of the Hon'ble Supreme Court dealing with old Section 4 and New Section 4 held that there is no difference in statutory concept of Transaction Value and Judicially evolved meaning of normal price. The appellant on this basis argued that with these judicial pronouncements all the judgements given with reference to the Old Section 4 i.e. before amendment of 2000 shall equally apply in the cases related to the period after amendment of 2000.
13. On going through the facts of the said judgmen we find that the assessee are charging to their customers certain amounts under different heads namely packing charges, facility charges, service charges, delivery charges and collection charges, rental charges , repaid and testing charges. The facts of the present case is different as the appellant is not charging separately. The issue involved in the present case is that the cost of corrugated boxes are used for packing of the final products is includable as clearly provided under Rule 6 of Central Excise Valuation Rules, 2000. Therefore the facts of the present case is completely different from the facts of the Hon'ble Supreme Court in the case of Grasim. Moreover, as per Rule 6 of Central Excise Valuation Rules, 200 it is explicit wherein, the provision for
6|Page E/10613-10614/2013-DB inclusion of cost of packing material supplied Free of Cost by the customer is provided. The Hon'ble Supreme Court in the case of Grasim (supra) have not dealt with the provision of Rule 6 of the Central Excise Valuation Rules, 2000. It is also pertinent to note that the Central Excise Valuation Rules, 2000 have not been struck down by the Hon'ble Supreme Court in the case of Grasim (supra).
It can be seen from the above production that the issue is now squarely covered against the appellant, we hold that the demand on merit is sustainable for first issue."
4.4 As regards the demand raised on the Appellant for the scrap of Capital Goods, we find that the demand was raised on the scraps generated from used packing material of inputs. The Appellant has clarified that they have paid the excise duty on manufacturing scrap and scrap generated out of cenvatable input/capital goods. They have not paid duty on the scrap in question as they are not manufacturing it therefore it does not form part of either manufacturing scrap or cenvatable scrap. As the show cause notice was badly issued by the Department without proper investigation into whether the Appellant has availed Cenvat Credit in respect to the scrap which was apparently cleared without payment of duty on such capital goods scrap. In the absence of any such investigation and the Department unable to adduce any evidence the allegation made in the Show cause notice is bad. In this position the submission of the appellant must be taken correct as there is no material produced by the revenue that states otherwise. Therefore, it is clear that the Appellant have cleared the scrap which is neither generated from cenvatable capital goods or cenvatable input nor from manufacturing. Therefore, the same is clearly not liable for any duty.
4.5 The identical issue was raised in the appellant's own case only for a different period wherein this tribunal has taken a consistent view that such scrap other than manufacturing and non-cenvatable is not liable to duty.
5. In view of the above findings, with respect to the first issue in identical circumstances, this Tribunal held that the demand is sustainable on merits and as regards the second issue the demand raised in the SCN is not sustainable. Accordingly the appeal is partly allowed in the above terms." [ In the above judgment, it is decided that if the Revenue is unable to produce any evidence in support of their claim for demand of duty under Rule 3(5A) that the Cenvat credit on the capital goods has been availed, demand under Rule 3(5A) will not be sustainable.
5. As per the discussion and finding and consideration of the judgments cited above, we are of the view that in the present case also the demand under Rule 3(5A) in respect of the waste and scrap of old capital goods is
7|Page E/10613-10614/2013-DB not sustainable. Accordingly, the impugned orders are set aside. Appeals are allowed, with consequential relief.
(Pronounced in the open court on 24.06.2024) (RAMESH NAIR) MEMBER (JUDICIAL) (C L MAHAR) MEMBER (TECHNICAL) Raksha