Custom, Excise & Service Tax Tribunal
M/S.Kisan Sahkari Chinni Mills Ltd vs Cce, Meerut-I on 13 July, 2010
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL,
WEST BLOCK NO.II, R.K. PURAM, NEW DELHI-110066.
SINGLE MEMBER BENCH
Court-IV
Excise Appeal No.2749-2750 of 2009-SM
Date of Hearing/Decision: 13.07.2010
(Arsing out of Order-in-Appeal No.84/CE/MRT-I/2008 dated 23.7.09 and No.83/CE/MRT-I/2008 dated 13.7.09 passed by the CCE(A), Meerut-I)
For approval and signature:
Honble Mr.Ashok Jindal, Member (Judicial)
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?
4
Whether Order is to be circulated to the Departmental authorities?
M/s.Kisan Sahkari Chinni Mills Ltd. Appellant
Vs.
CCE, Meerut-I Respondent
Present for the Appellant: Shri Vikrant Kackria, Advocate
Present for the Respondent: Shri S.K.Panda, JCDR
Coram: Honble Mr.Ashok Jindal, Member (Judicial)
ORDER NO._______________
PER: ASHOK JINDAL
The appellants are in appeals against the impugned order wherein the demand of duty has been confirmed on clearance of scrap and waste arising out of capital goods which have been cleared by the appellants without payment of duty.
2. The brief facts of the case are that the appellants are engaged in the manufacturing of sugar. During the course of their manufacturing activity, they procured capital goods which have been cleared by the appellants as waste and scrap of the capital goods during the period from December, 2004 to March, 2007. On information gathered by the department from the balance sheet of the appellants company for the period from 1.4.2005 to 31.3.2006, the investigations were made. Thereafter the show cause notice was issued dated. 17.11.07 for demand of duty on clearance of waste and scrap of capital goods cleared by the appellants without payment of duty for the period from April, 2005 to March, 2006 ( in Appeal No.E/2750/09-SM). Another show cause notice dated 2.9.2008 was also issued on the same ground for the period from January, 2007 to December, 2007 (in Appeal No.E/2749/09-SM). Both show cause notices were adjudicated and the demands are confirmed alongwith interest and equivalent amount of penalty under Section 11AC. On appeal, the lower appellate authority has confirmed the adjudication order. Aggrieved by the said orders, the appellants are before me.
3. Learned Advocate appeared on behalf of the appellants and submitted that the waste and scrap of capital goods have not been arisen out of manufacturing activity, therefore, the appellants are not liable to pay duty on the clearance of the waste and scrap of capital goods. To support his contention, he relied on the decision of the Tribunal in the case of Hindalco industries Ltd. vs. CCE, Allahabad reported in 2002 (144) ELT 339, Ranjeet Steels Ltd. vs. CCE, Chandigarh reported in 2003 (154) ELT 450 and in the case of CCE vs. Birla Corporation Ltd. reported in 2005 (181) ELT 263. He also relied on the decision of the Tribunal in the case of Triveni Engg. & Industries Ltd. vs. CCE, Meerut-I reported in 2007 (217) ELT 275 and submitted that the provisions to pay duty on the clearance of waste and scrap of capital goods have come into force with effect from 16.5.2005 as there was dispute whether the appellants are liable to pay duty on the clearance of waste and scrap of capital goods or not. Therefore, the extended period of limitation is not invokable in the facts and circumstances of the case. He further submitted that the show cause notice have been issued by invoking the extended period of limitation. He further submitted that the show cause notice dated 2.9.08 was issued for the subsequent period and after that the show cause notice dated 17.11.07 was issued on the same issue is not sustainable in view of the decision of the Apex Court in the case of M/s.Nizam Sugar Factory reported in 2006 (197) ELT 465. Therefore, the impugned orders are set aside.
4. On the other hand, Shri S.k.Panda, learned JCDR appeared on behalf of the Revenue and submitted that with effect from 16.5.05, Rule 3(5A) of Cenvat Credit Rules, 2004 clearly provides that duty is payable on the transaction value on the waste and scrap of capital goods by the appellants. Therefore, there is no doubt that the appellants are liable to pay duty on the waste and scrap of capital goods. Therefore, the department has rightly invoked the extended period of limitation. He further submitted that in the case of Hindustan Zinc Ltd. vs. CCE, Jaipur reported in 2009 (237) ELT 309, this Tribunal held that the waste and scrap arising out of capital goods when cleared, only a portion of value is to be recovered. Therefore, the lower authorities have rightly demanded duty on the clearance of waste and scrap of capital goods. He further relied on the decision of the Tribunal in the case of Kanoria Chemicals & Industries Ltd. vs. CCE, Allahabad reported in 2009 (235) ELT 130 on the ground of limitation. He prayed that the impugned orders are to be upheld.
5. Heard both sides and considered the submissions made by them.
6. On careful consideration of the submissions made by both sides, I find that the periods involved in these cases are prior to 16.5.05 and the periods after 16.5.05 are verifiable. The provisions of Rule 3(5A) of Cenvat Credit Rules, 2004 have come into effect from 16.5.05 which are reproduced below:
3(5A) If the capital goods are cleared as waste and scarp, the manufacturer shall pay an amount equal to the duty leviable on transaction value.
7. From the above provision, it is clear that if the assessee is clearing the waste and scrap arising out of capital goods, the assessee is liable to pay duty on the transaction value. Therefore, when the provisions are very clear the appellants cannot take an excuse that there was controversy on the issue. Therefore, the department has rightly invoked the extended period of limitation of issue of show cause notice dated 17.11.07 for demanding duty on waste and scrap arising out of capital goods cleared by the appellants without payment of duty during the period from April,2005 to March, 2006. As I have also observed that prior to 16.5.05, the appellants were relying on the decision of the Tribunal in the case of Hindalco Industries Limited wherein this Tribunal has held that the waste and scrap arising out of from machinery is not liable to duty. Therefore, the demands prior to 16.5.05 are not sustainable. As the show cause notice dated 17.11.07 in appeal No.E/2750/09 involved the period from April, 2005 to March, 2006, therefore the demands prior to 16.5.05 are not sustainable. The demands are required to be re-quantified.
8. With regard to appeal No.E/2749/09, the show cause notice dated 2.9.08 has been issued to the appellants by invoking the extended period is not sustainable in the light of the Apex Court decision in the case of Nizam Sugar Facatory as on the identical facts, the department has already issued a show cause notice dated 17.11.07, therefore, the appeal No.E/2749/09 is allowed as extended period of limitation is not invokable.
9. The matter is sent back to the adjudicating authority for re-quantification of the demands for the period after 16.5.05 to March, 2006 and to levy penalty accordingly.
10. With these observations, appeal No.E/2749/09 is allowed and appeal No.E/2750/09 is remanded back to the adjudicating authority for re-quantification of the demands as discussed hereinabove.
(ASHOK JINDAL) MEMBER (JUDICIAL) mk 6 6