2012 (4) TMI 508 - AT - Central Excise

Waiver of pre deposit - Benefit of Modvat credit - Burden of proof - Held that - It is well settled that the onus of establishing that the assessee is liable to pay excise duty is on the Department. Perusal of the adjudication order would show that it is not based upon a concrete evidence but on the assumption that the appellant must have taken Modvat credit in respect of the capital goods corresponding to the waste and scrap. There is nothing on record to indicate if the modvat credit account of the appellant was scrutinized before coming to the conclusion that the waste and scrap which are the subject matter of this appeal correspond to investment in capital goods i.e. plant and machinery relating to which modvat credit had been taken. In the absence of any such evidence, we find that the appellant has been able to make out a strong prima facie case for waiver of the condition of pre-deposit of the duty, interest and penalty. - Stay granted.

Summary

Issues:
Waiver of pre-deposit of duty, interest, and penalty as a precondition to hearing the appeal.

Analysis:
The appellant, a manufacturer of industrial gases, sold waste and scrap without paying excise duty during 2005-2009. The Department issued a show cause notice, contending that the appellant, who availed Modvat credit under Rule 3(5A) of the Cenvat Credit Rules, 2004, was liable to pay excise duty on the waste and scrap sold. The Joint Commissioner confirmed a duty demand of Rs. 5,62,887/- along with interest and imposed an equal amount of penalty.

The appellant argued that they did not avail Modvat credit for the capital goods corresponding to the waste and scrap, hence Rule 3(5A) was not applicable. They claimed the Joint Commissioner rejected their plea without basis and without verifying if Modvat credit was actually taken. The appellant contended that the absence of evidence supporting the demand made the order unsustainable, asserting a strong prima facie case for waiving the pre-deposit condition.

The Revenue argued in favor of the demand, citing an audit report stating that the appellant typically took credit for duty paid on capital goods, making them liable to pay duty on the scrap sold. The report indicated that the plant machinery was replaced every 7-8 years, suggesting Modvat credit was availed during the disputed period. The Revenue asserted that the demand was rightly confirmed and the appeal rightly rejected.

The Tribunal noted that the Department bears the onus of proving excise duty liability. The adjudication order lacked concrete evidence, relying on the assumption that Modvat credit was taken. The Tribunal found no scrutiny of the Modvat credit account before concluding the liability. As a result, the appellant established a strong prima facie case for waiving the pre-deposit condition. The Tribunal granted the stay petition, dispensing with the pre-deposit of duty, interest, and penalty until the appeal's disposal, including a stay on the penalty.

In conclusion, the Tribunal allowed the appeal to proceed without the pre-deposit condition, emphasizing the lack of evidence supporting the duty demand and penalty imposition, thereby granting relief to the appellant pending the appeal's final resolution.