TMI Blog2017 (2) TMI 978X X X X Extracts X X X X X X X X Extracts X X X X ..... n their RT-12 monthly returns. I find that the question of filing declaration or indicating in the monthly return regarding sale of waste and scrap of conveyor belts would not arise in view of bonafide belief entertained by the appellant as could be deduced from different interpretations followed by the Tribunal itself. There could be no substance in the allegation of fraud, suppression, wilful misstatement with an intention to evade payment of duty against the appellant in such a situation. The appellant is liable to pay Central Excise duty on waste and scrap of conveyor belts sold and cleared by them - the demand shall be restricted to normal period - decided partly in favor of the appellant. - E/2298/2004 - Final Order No. A/56357/2016-EX-[DB] - Dated:- 30-12-2016 - Mrs. Archana Wadhwa, Judicial Member and Shri, Sahab Singh, Technical Member For the Appellant: Shri B.L. Narasimhan, Adv., Shri Hemant, Adv., For the Respondent: Shri M.S. Negi, D.R. ORDER M/s. SAIL, Bhilai Steel Plant, (here in after referred to as appellants) are engaged in the manufacture of Iron and Steel products falling under Chapter 72 73 of Central Excise Tariff Act, 1985. They wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on waste and scrap under chapter heading 4004 of the Central Excise Tariff. He submits that as per chapter note 6 under the chapter 40 of the Central Excise Tariff waste, parings and scrap' means rubber waste, parings and scrap from the manufacture of working of rubber and rubber goods and rubber goods definitely not usable as such because of cutting-up, wear or other reasons. He submits that the waste of scrap of Conveyor Belt does not fall under this category and therefore demanding of duty under 4004 is not sustainable. He also relied upon decision of Mysore Cements Ltd., reported in 2006 (206) E.L.T. 1179 (Kar.). Where in it was held that the waste arising from processing of inputs not leviable to duty. The Ld Advocate also submits that the demand is also hit by the time limitation as Show Cause Notice was issued on 16.10.2001 demanding duty for the period of Sep, 1996 to Mar. 2001. He submits that their submissions were made before the Tribunal in the earlier proceedings and the impugned order was set aside by the Tribunal. 3. The Ld D.R. appearing for the Revenue submits that the appellants have taken credit of duty paid on conveyor belts and after repeated use wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yor belts were sold as waste and scrap by the appellants Under rule 57S (2)(C) when the capital goods are sold as waste and scrap the manufacture shall pay the duty leviable on such waste and scrap. Therefore Revenue is rightly demanding duty on such waste and scrap. 5. The appellant's contention is that such waste and scrap does not fall under heading 4004 under which the duty has been demanded by the Department. We find that Tariff Heading 4004 reads as under: 40.04 4004.00 Waste, parings and scrap of rubber (other than hard rubber) and powders and granules obtained there-from We have also seen the chapter note 6 of the chapter 40 which reads as under: 6. For the purposes of heading No. 40.04, the expression 'waste, parings and scrap' means rubber waste, parings and scrap from the manufacture of working of rubber and rubber goods definitely not usable as such because of cutting-up, wear or other reasons. We have also seen the HSN Explanatory Notes of Heading 4004 which reads as under: 40.04 - WASTE, PARINGS AND SCRAP OF RUBBER (OTHER THAN HARD RUBBER) AND POWDERS AND GRANULES OBTAINED THEREFROM. The expression waste, parings and scrap is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e we find the waste and scrap has arisen on account of dismantling of the equipment and issue was excisability of such scrap. Facts of this case are distinguishable from the present case as the duty has been demanded under rule 57S (2) on the waste scrap of conveyor Belt. On the other hand Revenue has relied on the decision of Hon'ble Gujrat High Court in case of GNFC Limited Vs. Union of India of reported 2007 (214) E.L.T. 18 (Guj.) wherein it has been by the Hon'ble High Court as under: 5. On a plain reading of the said Rule, it is clear that where capital goods are sold as waste and scrap, the manufacturer is bound to pay the duty leviable on such waste and scrap. Clause [c] of sub-rule (2) of Rule 57-S of the Rules has to be read in light of clauses (a) and (b), which precede clause [c]. It is apparent that the Rule does not deal with the capital goods as final products, but capital goods which are used for the purposes of manufacture. The contention on behalf of the appellant that waste and scrap can be amenable to duty only when it is generated in the process of manufacture, does not merit acceptance in light of the facts of the case, for the simple reason that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd scrap of the used conveyor belts. The said contention of the Revenue stands accepted by the learned Member (Technical) who has agreed with the finding of the Commissioner that the appellant had suppressed clearance of such waste and scrap and once such suppression is established , the extended period of limitation is available to the Revenue. 10. I find that the limitation has been the subject matter of various decisions of quasi-judicial as also judicial authorities. The provision of subsection 11A proviso are applicable wherever the duty of excise has not been levied or paid or short levied or short paid or erroneously refunded on account of fraud, collusion, willful misstatement or suppression or contravention of any provision of the Act or Rules made there under with intent to evade payment of duty. As such it is seen that mere non-disclosure of information to the Revenue by not filing classification list or statutory return etc. by itself cannot be made the reason for invocation of extended period of limitation unless such non-action on the part of the assessee is with intent to evade payment of duty. The Hon'ble Supreme Court in various decisions has held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. In the facts and circumstances of this case, there were materials, as indicated to suggest that there was scope for confusion and the appellants believing that the goods came within the purview of the concept of handicrafts and as such were exempt. If there was scope for such a belief or opinion, then failure either to take out a licence or to pay duty on that belief, when there was no contrary evidence that the producer or the manufacturer knew that these were excisable or required to be licensed, would not attract the penal provisions of Section 11-A of the Act......... Further, in the case of Pushpam Pharmaceuticals Co. vs. C.C.E. 1995 (78) ELT 401 (SC) , it was observed that .the proviso carves out an exception and permits the authority to exercise this power within five years from the relevant date in the circumstances mentioned in the proviso, one of it being suppression of facts. The meaning of the word both in law and even otherwise is well known. In normal understanding it is not different that what is explained in various dictionaries unless of course the context in which it has been used indicates otherwise. A perusal of the proviso indicates that it has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctured by him in his declarations. Further in the case of Tamil Nadu Housing Board vs. C.C.E. - 1994 (74) ELT 9 (SC), the Hon'ble Supreme Court observed as under:- . A bare reading of the proviso indicates that it is in nature of an exception to the principal clause. Therefore, its exercise is hedged on one hand with existence of such situations as have been visualised by the proviso by using such strong expression as fraud, collusion etc. and on the other hand it should have been with intention to evade payment of duty. Both must concur to enable the Excise Officer to proceed under this proviso and invoke the exceptional power. Since the proviso extends the period of limitation from six months to five years, it has to be construed strictly. The initial burden is on the Department to prove that the situations visualised by the proviso existed. But once the Department is able to bring on record material to show that the appellant was guilty of any of those situations which are visualised by the Section, the burden shifts and then applicability of the proviso has to be construed liberally. When the law requires an intention to evade payment of duty then it is not mere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ni Products (supra), the appellants were not even having any licence for manufacture of the goods and admittedly, even the existence of the appellant was not in the knowledge of the Revenue. If non-filing of classification list or statutory return is required to be held as a ground for invocation of longer period of limitation, the Padmini Products could not have been granted relief by the Hon'ble Supreme Court on the point of limitation. There is no such circumstance mentioned in Section 11A thus empowering the Revenue to invoke longer period of limitation for mere non-filing or non-intimation to the Revenue. 13. Apart from the fact that there is no positive action on the part of the assessee to suppress the fact of clearance of waste and scrap from the Revenue, I also note that the issue involved is a technical issue and is capable of interpretation on both sides. Merely because the appellant has interpreted the issue to their benefit, by entertaining a bona fide belief that such clearance of waste and scrap of conveyor belts in respect of which they have availed credit, is not required to discharge the duty liability, they cannot be held guilty of any mala fide. Apart fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n merits of the case, against the appellant but there was no decision on merits by the Member Judicial. 2. When the matter was placed before the third Member, it was observed that it is obligatory on the part of Member Judicial to give her opinion on the merits of the case, in as much as the matter was being decided in a remand proceedings, in terms of the remand order of Hon'ble High Court. 3. As is seen, the matter should have been placed before Judicial Member Mrs. Archana Wadhwa for giving her opinion on merits, however the matter stands fixed today before a Division Bench consisting of Member Judicial Mrs. Archana Wadhwa and Member Technical Shri Rakesh Kumar, in terms of the note sheet order dated 10/02/2014 of the Hon'ble President. As it is found that the matter should have been placed before Member Judicial only, for recording of her opinion and not before the Division Bench [in as much as Member Technical had already given his opinion on merits]. The registry is directed to place the file before the Hon'ble President for appropriate constitution of the Bench. The matter is accordingly adjourned to 16 th April, 2014. (Archana Wadhwa) Judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its which we have refrained from making on our forming a opinion to remand the case for its fresh hearing. (13) Parties to appear before the Tribunal on 7th January 2013 and produce the copy of this order to enable the Tribunal to decide the appeal within six months from the date of parties' appearance as directed above. 2. As a consequence of the order of remit and in fidelity thereto it was required that this Tribunal should adjudicate the appeal on substantive merits, including on the point of limitation as the same is also urged as one of the grounds for challenging the adjudication order. 3. After remand, the appeal was heard by a Division Bench. A conflict of view however ensued. The Hon'ble Member (Technical) analysed the appeal on substantive merits and concluded that broken/worn-out conveyor belts were excisable goods liable to levy of duty; rejected the plea of the assessee with regard to the bar of limitation as well; and held that invocation of the extended period of limitation was valid. In a separate opinion, the Id. Member (Judicial) differed on the point of limitation and concluded that invocation of extended period of limitation was unwarra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o.163/2013, there was opinion of difference between the Member(Technical) and Member(Judicial) on the point of limitation. However, Member(Technical) expressed his opinion as regards merits of the case as also on limitation, rejecting the both, whereas Member(Judicial) only considered the limitation issue and held that the demand was barred by limitation. When the matter was placed before the Hon ble President, as third Member, on 06/09/2013, it was observed that inasmuch as the matter stands remanded by the Hon ble Chhattishgarh High Court for decision on merits as also on limitation, both the Members should have decided on the merits of the case. As such, the appellant was advised to move an application before the Member(Judicial) to express her opinion on both the issues. It is in this background that the matter was heard afresh by me, as regards the merits of the case. 3. The detailed factual position stands mentioned in the order recorded by the learned Member(Technical). As is seen, the dispute is as to whether the used and old conveyor belts removed by the appellant as waste and scrap, are required to discharge its duty liability in terms of the provisions of Rule 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were originally falling under heading 84.28, the conveyor belts would not shift their classification under heading 40.04, after their use, when they still remain the conveyor belts and do not get converted into any waste and scrap. For the above proposition, they have relied upon various decisions of the Tribunal as also of the courts. 6. I have considered the submissions made by both the sides. 7. Though the Hon ble Supreme Court s decision in the case of Grasim Industries Ltd. Vs. UOI [2011(273) ELT 10 (SC)] is not exactly on the point but I would like to refer to the same, for the purpose of adopting certain the observations made by the Hon ble Supreme Court. It stands held by the apex court that the scrap or waste arising from repair and maintenance of plant and machinery (capital goods) installed in cement factory is not dutiable as they are neither by-products of the final product nor subsidiary product. To be dutiable, waste and scrap must arise regularly and continuously produced in the course of manufacturing business of the product manufactured by the assessee. It further stands observed by the Honble Supreme Court that the metal, scrap and waste specified ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n para 2 of the said decision, it stands mentioned that the credit was availed on 27/10/2001. As such, it can be safely concluded that the period involved in the Mysore Cements Ltd. case was after 1994 and before 01/07/2001, when the provisions of Rule 57S(2)(C) were in the statutory book. As the said decision specifically deals with the conveyor belts and as the said decision stands upheld by the Honble High Court of Karnataka, I am of the view, that the sale of old and use conveyor belts would not attract any further levy of duty under Chapter 40. 9. I have already observed that the old and used rubber goods would fall under Chapter 40 only when they are converted into waste and scrap before their removal. Merely on account of repeated use, old and used conveyor belts would not be shifted to Chapter 40, from their maiden classification under Chapter 84. The fact that no processing was undertaken on the conveyor belts at the time of their clearances, is clear from the allegations made in the show-cause notice. Para 2 of the notice details as under: ...... Conveyor belts are used by the Noticee as capital goods which has got certain life and due to its repeated use, conv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attracted. Reverting back to the example of wooden chair, it may not be usable for the owner of the chair, on account of any number of reasons, but still the same may be used as chair by the buyer of the same. Inasmuch as the conveyor belts have been cleared as conveyor belts, it cannot be concluded that the same were not usable as such. 10. I may like to clarify here that I have not examined the aspect of duty payment on old and used conveyor belts, under Chapter 84 of the Central Excise Tariff, as the same was neither the Revenue s case in the show-cause notice nor the any submissions were made in respect of the same. 11. In view of the above, I find that the provisions of Rule 57S(2)(C) of the CENVAT Credit Rules are not attracted in the present case inasmuch as the goods cleared by the appellant are not leviable to duty of excise. In view of the above, I hold in favour of the appellant on merits. (Pronounced on 21.01.2015) (Archana Wadhwa) Judicial Member Mr. G. Raghuram, President INTERIM ORDER NO. 29/2016 The matter is listed before me to answer the difference of opinion recorded in interim order No. 163/2013 bearing a date - 7.1.2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, the reference only on the bar of limitation would be incomplete and in the circumstances, the appellant be granted liberty to move a miscellaneous application for seeking a conclusion on the merits as well, by the Id. Judicial Member. The miscellaneous application filed by the appellant was heard on 26.12.2014 and by the order 21.1.2015 the Id. Judicial Member pronounced conclusions on the merits of the appeal as well and ruled in favour of the appellant. 5 In the above circumstances, there is clearly a difference of opinion between the Id. Judicial Member and Ld. Technical Member, both on the issue as to the bar of limitation (which is the sole issue referred vide order dated 7.1.2013), as also on the merits of the appeal which is the consequence of the Technical Member's order against the appellant on merits dated 7.1.2013 and Id. Judicial Member holding in favour of the appellant on merits by the order dated 21.1.2015. 6. The order dated 7.1.2013 which has framed the difference of opinion is however limited to the difference of opinion arising on the aspect of applicability of the bar of limitation. 7. In the above circumstances, in order to facilitate framing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er afresh, a difference of opinion arose between the Members of the Division Bench of the Tribunal. The above said reference to the Third Member is consequence of such difference of opinion. 3. The learned Counsel for the appellant submitted that the order of Member (Judicial) correctly reflects the legal position both on merit and on time bar. He mostly reiterated the findings recorded therein. 4. The submissions made by the learned Counsel for the appellant can be summarised as below : (a) The nature of item cleared is to be considered to arrive at the duty liability. In the present case the appellants are not engaged in the manufacture of any rubber products and hence the question of classifying the waste and scrap of rubber under Central Excise Tariff Heading (CETH) 4004 does not arise. This is very clear from the Note 6 of the said Chapter ; (b) There is no question of levy of Central Excise duty on the waste and scrap of worn out conveyor belts cleared by the appellants as they cannot be held as manufacturers or producers of these items and charged to duty in terms of Section 3 of the Act ; (c) The appellant's case is covered by the decision in M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir duty liability when they are cleared after dismantling. Neither the classification nor the applicability of Rule 57-S was subject matter of decision ; (iii) Regarding time bar it was submitted that the appellants did not file due declaration under Rule 173B of the Central Excise Rules, 1944 and did not mention the clearance of such dutiable scrap in their statutory RT-12 monthly returns. It was submitted that they have suppressed the facts of clearance of waste and scrap of conveyor belts from the Department and, hence, extended period is rightly invoked and penalty also rightly imposed on the appellant. 6. I have heard both the sides extensively and perused the appeal records including the written submission and various case laws referred to by both the sides. The admitted facts of the case are that the appellants initially have taken duty credit, as capital goods, on conveyor belts and after their prolonged use these items became worn out and not usable and as such were sold by them in the market as waste and scrap. 7. The first point to be decided is whether or not the appellants are liable to discharge duty on such clearance of waste and scrap on the value of consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aped and sold due to wear and tear. In this connection, it is relevant to note the HSN Explanatory note for heading 4004. It further elaborates the scope of the said heading and also refers to Note 6 of the Chapter. It is clearly mentioned that goods of rubber definitely not usable as such because of cutting up, wear or other reasons shall be classified as waste, parings and scrap. Reading together the heading and the explanatory notes make it clear that the waste and scrap of worn out conveyor belts is covered by the above said tariff heading for the purpose of Central Excise levy in terms of Rule 57-S. 9. I have examined the various case laws relied upon by both the sides. The appellants as well as Member (Judicial) relied on the decision of the Tribunal, as affirmed by the Hon'ble Karnataka High Court in Mysore Cements Ltd. (supra). A careful reading of the above said decision will show that the decision was to the effect that the scrap and waste arising in course of dismantling of equipment will not be liable to duty. Admittedly, there was no examination of the scope of Rule 57-S and scope on tariff entry 4004. In this connection, I find it relevant to refer to the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t scheme and the appellants availed the scheme subject to such condition. The condition cannot be made redundant by applying a different interpretation. As such, I find that the Original Authority has correctly upheld the duty demand against the appellant on the clearance of waste and scrap of conveyor belts in view of the then prevailing legal provisions during the material time. 11. The next question is the correctness of demand for extended period in the present case. Admittedly, the appellants are not involved in any manufacture of rubber products in their normal course of activity. It is understandable that they did maintain a bonafide belief on the dutiability of worn out scrap of conveyor belts during the material time. Admittedly also, that the issue involved is one of close legal interpretation of the provisions of Modvat Rules. The existence of different views on the issue is apparent. Even the Tribunal in the first round of litigation held in the appellant's favour. Even now on merit, there is a difference of opinion in the Division Bench itself. In such a scenario it is not justifiable to attribute malafideness on the appellant with an intention to evade paymen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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