TMI Blog2022 (9) TMI 1339X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case the appellant has also undertaken an internal procedure for determination of the nature of the capital goods to be cleared by it. The goods are thereafter sent to OEM and Chartered Engineer for further verification as to whether the goods qualify as scrap. Only when the goods have been certified that they were sold as to scrap management companies having registration under Hazardous Waste Management Rules - It is, therefore, clear that the capital goods cleared by the appellant would qualify as scrap and no amount was required to be paid while clearance of the same by the appellant. Extended period of limitation - HELD THAT:- It is not necessary to examine the contention advanced by learned counsel for the appellant that the extended period of limitation could not have been invoked in the facts and circumstances of the present case. The impugned order dated 29.07.2016 passed by the Additional Director, therefore, cannot be sustained and is set aside - Appeal allowed - decided in favor of appellant. - SERVICE TAX APPEAL NO. 52881 OF 2016 - FINAL ORDER NO. 50932/2022 - Dated:- 26-9-2022 - MR. DILIP GUPTA, PRESIDENT AND MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are either sent for repair to vendors or are decided to be cleared as scrap; (v) If the goods are decided to be cleared as scrap, then the goods are sold to various scrap management companies, having registration under Hazardous Waste Management Rules. 6. The appellant has further stated that the purchasers of the goods are all scrap management companies and, in this respect, certificates have been issued to the purchasers by the Principal Environment Commissioner, Rajasthan State Pollution Control Board, for procurement and recycling of scrap under the Hazardous Waste Management Rules. 7. However, proceedings were initiated by the Department with respect to the capital goods which were removed as scrap without payment or reversal of amount. Investigation was initiated by way of issuance of summons, examination of documents submitted by the appellant and recording of statements of Vice President (Finance) of the appellant. During the course of investigation, the appellant also deposited an amount of Rs. 12,00,00,000/- under protest. Thereafter, a show cause notice dated 27.10.2015 proposing recovery of amount in terms of rule 3(5A) of Credit Rules along with interest and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ine whether rule 3(5A) of the Credit Rules could have been invoked in the present case and for this purpose the scope of this rule as it stood prior to 27.09.2013 and post 27.09.2013 is required to be considered. The relevant portions of rule 3(5) and rule 3(5A) of the Credit Rules are contained in the following tabular form: Sl.No. Period Rule 3(5) and Rule 3(5A) of Credit Rules 1. Prior to 27.02.2010 Rule 3(5)- ... Provided also that if the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output service shall pay an amount equal to the CENVAT credit taken on the said capital goods reduced by 2.5% for each quarter of a year or part thereof from the date of taking the CENVAT credit. Rule 3(5A)- If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. 2. Between 27.02.2010 to 16.03.2012 Rule 3(5) Provided further that if the capital goods, on which CENV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be equal to the duty leviable on transaction value. 4. From 27.09.2013 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 eq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 and during the period from 27.09.2013 and onwards. But which capital goods can be considered as waste and scrap is an important aspect here, which needs consideration. A.3.11 . In find from the said provisions that during the 1st period in question here i.e. from 27.02.2010 to 16.03.2012 and during the third or last period in question here i.e. with effect from 27.09.2013, payment of amount on removal of waste and scrap capital goods by a service provider has been omitted. A.4.3. I fully agree with the above contention of the Noticee, that in the situation of clearance of Capital goods as waste and scrap by a service provider, there is no provision either under Rule 3(5A) of CCR, 2004 during the period 01.03.2011 to 16.03.2012 and during the period during 27.09.2013 to 31.03.2015 to pay any amount. However, the burden of proving that the capital goods cleared by any assessee are in the nature of waste and scrap lies on the assessee, to clear the capital goods without payment of an amount as per the provisions of CCR, 2004. A.5.1 . In this regard I fully agree with the Noticee s contention that in case of service providers for clearance of Capital goods as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... working of materials and is not usable as such due to breakage, cutting, wear and other reasons. 37. The definition of scrap in the Income Tax Act could not have been resorted to by the Additional Director as it was defined in a different context. The term scrap has been used in the Income Tax in the sense of a waste by-product generated during the manufacturing, but the Credit Rules envisage clearance of capital goods in the form of scrap when the same can no longer be used. 38. This apart, in case a term has not been defined in a particular Statue, reference can always been made to the definition of the said term in dictionaries. For this purpose reliance can be placed on the decision of the Supreme Court in MSCO Pvt. Ltd., wherein the following observations have been made: The expression 'industry' has many meanings. It means 'skill', 'ingenuity', 'dexterity', 'diligence', 'systematic work or labour', 'habitual employment in the productive arts', 'manufacturing establishment' etc., But while construing a word which occurs in a statute or a statutory instrument in the absence of any definition in tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urement and recycling of scrap under the Hazardous Waste Management Rues. The appellant, therefore, could not have undertaken the process of breaking the items and it cannot be urged that these items would not be scrap merely because they have not been broken before disposal. 42. The inevitable conclusion that follows from the above discussion is that the capital goods cleared as scrap by the appellant are scrap and, therefore, the appellant, being an output service provider, was not required to pay any amount in terms of rule 3(5A) of the Credit Rules. 20. In the present case the appellant has also undertaken an internal procedure for determination of the nature of the capital goods to be cleared by it. The goods are thereafter sent to OEM and Chartered Engineer for further verification as to whether the goods qualify as scrap. Only when the goods have been certified that they were sold as to scrap management companies having registration under Hazardous Waste Management Rules. 21. It is, therefore, clear that the capital goods cleared by the appellant would qualify as scrap and no amount was required to be paid while clearance of the same by the appellant. 22. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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