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TMI Blog2024 (5) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11AC of the Central Excise Act, 1944 read with Rule 25 of the Central Excise Rules, 2002. 2.1 Appellant is engaged in manufacture of V P Sugar and Molasses falling under Chapter 17 of the First Schedule to Central Excise Tariff Act, 1985. They are also availing the CENVAT Credit of duties paid on inputs and capital goods. 2.2 Examination of sale-challans, balance sheets and Trial Balance for the period June 2006-December 2009, revealed that appellant had sold scrap generated from working capital goods, total valued at Rs 1,52,63,682/- without paying an amount equal to the duty leviable on the said transaction value in contravention of the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004. 2.3 Appellant has not maintained any record/ inventory in respect of production generation and clearance/ sale of waste & scrap arisen out of Capital goods separately nor paid due duty thereon. They also did not mention about these transactions in their reports/ returns submitted to the department from time to time. Thus they have willfully suppressed the facts of sale of waste and scrap generated out of Modvated capital goods, as the appellant was availing the facility of Modv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y them. The appellants have contested the aforesaid allegation and in this regard the thrust of the appeal is that -(1) for levy of duty on sale of waste & scrap of capital goods, the essential ingredient such as emergence of waste as a result of any manufacturing process or mechanical working on capital goods on which Cenvat credit had been taken was absent in the allegation (2) no evidence had been adduced by the department to prove that waste & scrap arose from the capital goods on which Cenvat credit was taken. 6. It is observed that the adjudicating authority in the impugned order, has held that- "....Thus it is obvious that until and unless the party proves that the waste and scraps to be sold are arisen out of non-cenvatable capital goods they have to pay the duty thereon." (p-5) 7. I find that the sale of waste & scrap of capital goods is not under dispute. Regarding leviability of duty on such sold waste and scrap, I shall visit the Notification No.27/2005-CE(NT) dated 16.05.2005, whereby, sub-rule(5A) was inserted in Rule 3 of the Cenvat Credit Rules,2004 which reads as under- "Cenvat Credit Rules, 2004 - Seventh Amendment of 2005- In exercise of the powers con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital goods was not provided" but have failed to bring anything concrete in support of their contention. Thus the contention is not tenable and so not acceptable. Hon'ble Tribunal in the case of Steel Authority of India Limited Vs. Commissioner, Central Excise, Raipur [2007 (208) E.L.T. 367 (Tri. - Del.)] observed "The adjudicating authority concluded against the appellant by observing that they have failed to produce any supporting documentary evidence regarding the period/duration of use of such CI/ Steel Rolls before the sale/removal of the same as waste and scrap. .. ........... This could be proved by the appellant from the documentary records maintained by them for the said purpose or from the buyers, who have purchased the same and the use to which the same has been put to. Admittedly no efforts have been made by the appellant to substantiate their claim of the said capital goods having become waste and scrap." [Emphasis supplied] 8.1 I observe that the necessary documents and any other material, demonstrating the procurement of capital goods prior to Modvat/Cenvat Scheme and also dismantling those capital goods as claimed, have not been put On record by the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically viable to ascertain whether sold scrap belongs to non-cenvatable capital goods." (p-4) The adjudicating authority has further observed that, "The department proved that the party sold the waste and scrap and took the evidence of balance sheet for that fact. It is obvious that the preparation of balance sheet cannot be done without base records. There must be document relating to issue of scrap to the store, store records to take the scrap in store, issue of scrap from the store for sale and figures calculation of whole year for preparation of balance sheet etc. These records were utilized for preparation of balance sheet which were basis to show the origin of scraps but the party suppressed these documents" "The party was liable to produce such documents/ records to be exonerated from the payment of Govt. money in terms of section 104 of the Evidence Act which provides as under:- Burden of proving fact to be proved evidence admissible: The burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence Accordingly party had to prove that the sold scrap were arisen out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the contentions raised by them in the appeal memo particularly about pre-modvat scheme stock of scrap we do not see any warrant to interfere with the impugned order and accordingly uphold the same." Further, in the case of M/s GNFC Ltd. v. Union of India reported in [2007 (2i4) E.L.T. A23 (S.C.)] "Where capital goods are sold as waste and scrap, the manufacturer is bound to pay the duty leviable on such waste and scrap." support the case of the department." 4.3 Undisputedly the show cause notice records the contention of the appellant, in the following words: "Whereas the party vide their letter dated 11.01.2010 have stated that the excise duty is not payable on the sold scrap as it was the scrap arising out of capital goods on which no Cenvat credit had been availed as the sold scrap were under generic names of Heavy and Japani which were consisted of miscellaneous items arising out of the old equipments purchased prior to 2000 while they started availing Cenvat Credit of capital goods from the year 2001 when factory resumed operations after the closure. However, the party failed to explain the fact that the sold scrap were generated from the capital goods on which Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concluded that Rule 3 (5A) is applicable only to the Cenvated Capital goods, he should have dropped the proceedings initiated by this show cause notice. 4.6 Delhi bench has in the case of Karnal Co-Operative Sugar Mills Ltd. [2011 (265) E.L.T. 236 (Tri. - Del.)] held as follows: "6. I have carefully considered the submissions made from both sides and perused the records. The demand has been sustained on two grounds which are overlapping. The show cause notice alleges that the goods cleared by them are excisable. It also alleges that the goods cleared as waste and scrap has arisen out of capital goods on which credit has been taken. No attempt has been made to segregate the goods under each of the above categories. It suffices to say that in respect of allegation regarding manufacture of excisable goods, the burden of proof is on the department to adduce the evidence. In the absence of such evidence having been relied upon, the issue requires to be considered in the light of the second allegation that the goods have been cleared as waste and scrap have arisen out of capital goods on which the appellants have taken the credit. Admittedly the appellants were not able to produce do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tured was not correct. The ground was taken that dismantling of capital goods would be the process amounting to manufacture and that a distinct commodity namely waste and scrap came into existence. This is not acceptable. Therefore, the Commissioner‟s finding that the goods were not held as manufactured and no duty was leviable cannot be faulted. The reduction of penalty in view of the reduction in demand of duty on the above grounds is also justified." 4.8 In case of Sandoz India Ltd. [1980 (6) E.L.T. 696 (Bom.)], Hon'ble Bombay High Court has held as follows: "11. It is settled law that in a case of taxation the burden of proving that the necessary ingredients prescribed by the taxing provision are satisfied is entirely upon the taxing authority. ...." 4.9 The decision of Hon'ble Supreme Court in the case of Mysore Metal Industries, relied in the impugned order is in respect of the claim to an exemption made by the party. It is settled position in law that any person who claims an exemption needs to establish that he is entitled to the said benefit. However in the present case we are not dealing with the claim of an exemption but with the contravention of provision of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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