Whether provisions of Rule 3(5A) applicable on POP moulds cleared as waste/scrap after use?

PJ/Case law/2013-14/1926

Case:-ROCA BATH ROOM PRODUCTS PVT. LTD. VERSUS COMMISSIONER OF C.EX., JAIPUR-I

Citation:- 2013(32) S.T.R. 226 (Tri.-Del.)

Brief Facts:-Appellant manufactures sanitary ware. For manufacture of sanitaryware, they make Plaster of Paris (POP) moulds. For manufacture of POP moulds they use propane gas and input services in respect of which Cenvat credit has been taken. After use, the POP moulds are sold as waste. The Department was of the view of that since in respect of manufacture of POP moulds, Cenvat credit on inputs and input services has been availed as per the provisions of Rule 3(5A) of Cenvat Credit Rules, 2004, at the time of clearance of such scrap, an amount equal to excise duty on transaction value shall be payable. On this basis a show cause notice was issued for demanding an amount equal to excise duty on the sale price of POP scrap. SCN also sought recovery of interest on duty and imposition of penalty. The SCN was adjudicated by the Assistant Commissioner vide order-in-original No. 30/31-3-2011 by which duty demand of Rs. 1,10,027/- was confirmed along with interest and besides this, equal amount of penalty was imposed. This order of Assistant Commissioner was confirmed by Commissioner (Appeals) vide order-in-appeal dated 27-1-2011/1-2-2011 against which this appeal along with stay application has been filed.

Appellant Contentions:-The appellant pleaded that Rule 3(5A) of the Cenvat Credit Rules, 2004 is not applicable, that this rule is applicable only where Cenvat credit taken capital goods have been cleared after use, as scrap, while in this case, neither any duty has been paid on POP moulds nor credit of that duty has been taken; that POP scrap is non- excisable and hence in any case, no duty is payable on POP scrap, and that in view of this, the impugned order is not correct and hence the requirement of pre-deposit of duty demand, interest and penalty may be waived for hearing of the appeal and recovery thereof be stayed till the disposal of the appeal.

Respondent Contentions:-The Department opposed the stay application by reiterating the findings of the Commissioner (Appeals) in the impugned order.

Reasoning of Judgment:-We have considered the rival contentions. Prima facie, we find that Rule 3(5A) of Cenvat Credit Rules, 2004 provides that "if the capital goods are cleared as waste and scrap the manufacturer shall pay an amount equal to the duty leviable on transaction value". The capital goods mentioned in the sub-rule are Cenvat credit availed capital goods. Prima facie, sub-rule (5A) of Rule 3 of Cenvat Credit Rules applies in those cases where Cenvat credit availed capital goods after use in the factory are cleared as scrap and waste and only in such situation an amount equal to the duty on transaction value of such scrapped capital goods shall be chargeable. In this case, POP moulds cannot be said to be cenvated capital goods, as cenvat credit has been taken of the duty/Service Tax paid on inputs/input services, not of excise duty on POP moulds. In view of this we are of the prima facie view that the appellant have a case in their favour. Accordingly, the requirement, of pre-deposit of duty demand, interest and penalty is waived for hearing of the appeal and recovery thereof is stayed till the disposal of the appeal. The stay application is allowed.

Decision:-Stay Application allowed.

Comment:-The gist of this case is that the provisions of Rule 3(5) apply when capital goods are cleared as waste/scrap after use but as the POP moulds are not cenvated capital goods, prima facie the provisions of said rule are not applicable and the demand is prima facie not tenable. Consequently, the stay application was allowed.

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PJ/Case law/2013-14/1926

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