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PJ/Case Laws/2012-13/1450

Duty payable on transaction value on failure to adduce evidences to claim that no credit had been availed on capital goods cleared as scrap.

Case:-M/s NATIONAL RAYON CORPORATION LTD V/S COMMISSIONER OF CENTRAL EXCISE, THANE-I
 
Citation:- 2013-TIOL-276-CESTAT-MUM
 
Brief Facts: - The applicants filed this appeal along with application for waiver of pre-deposit of dues. The Tribunal vide stay order dated 4/10/2011 directed the applicants to deposit an amount of Rs.20 lakhs against the demand of Rs.83,37,278/- for hearing of the appeal. The applicants challenged the order passed by the Tribunal before the Bombay High Court and the Hon'ble Bombay High Court vide order dated 19/04/2012 set aside the order passed by the Tribunal and directed the Tribunal for fresh consideration in accordance with law. The demand of Rs.83,37,278/- is confirmed in respect of scrap of capital goods cleared by the applicants without payment of duty. The applicants were working under the CENVAT Credit Scheme and availed credit in respect of inputs as well as capital goods. During the period 2005 to 2009 the applicants cleared the scrap valued at Rs.5,09,85,377/- without payment of duty. The adjudicating authority confirmed the demand in view of the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004 which provides if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.

Appellant’s Contention: - The appellant contended that they specifically submitted before the adjudicating authority that in respect of the capital goods which were cleared no credit has been availed as their unit were 50 year old. Therefore, the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004 are not applicable and this contention was not taken into consideration by the adjudicating authority while confirming the demand. The applicants also pleaded financial hardships on the ground that the unit is declared as sick.

Respondent’s Contention: - The respondent argues that the applicants had not produced any evidence in support of their pleading that no credit has been availed on the capital goods which was cleared as scrap. Hence, the demand is correctly made on the appellants.
 
Reasoning of Judgment: - The Hon’ble Tribunal held that as per the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004, if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. In the present case, the applicants were working under the CENVAT Credit Scheme and availed credit in respect of inputs as well as capital goods. Scraps of the capital goods were cleared during the period 2005 to 2009. The applicants failed to produce any evidence in support of their claim that no credit has been availed in respect of the capital goods of which scraps were cleared. Therefore, prima facie, no strong case has been made out by the applicants for total waiver of pre-deposit of the dues. However, in the facts and circumstances of the case and also the financial hardships as pleaded, the applicants are directed to deposit Rs.10 lakhs within a period of six weeks. On deposit of the above mentioned amount, pre-deposit of the balance dues is waived and recovery thereof is stayed during the pendency of the appeal.

Decision: - Stay partly granted.

Comment:-The essence of this case is that the provisions of Rule 3(5A) regarding payment of duty on clearance of waste and scrap of capital goods arises when credit has been taken on them earlier and in the instant case, as the assessee was unable to prove that no cenvat credit was taken by him on such capital goods cleared as waste, pre-deposit was ordered.

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