2010 (11) TMI 268 - AT - Central Excise

Demand - The show cause notice alleges that the goods cleared by assessee 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 categories - 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 - The appellants were not able to produce documents on the ground that they relate to very old period. Held that the department has not adduced any evidence relating to the allegation of manufacture of excisable goods and therefore the entire goods should be treated as clearance of waste and scrap which has happened prior to 16-5-05 - Therefore there is no liability to duty or payment of amount as per Rule 3 (5A) of Cenvat Credit Rules.

Summary

Issues:
- Appeal against order of Commissioner (Appeals) regarding duty on scrap of iron and steel and brass.
- Burden of proof on department for excisability.
- Claim that scrap arose from capital goods installed prior to 1989-90.
- Interpretation of Rule 3(5A) of Cenvat Credit Rules.
- Lack of evidence on goods being excisable or arising from capital goods.
- Decision based on absence of evidence and interpretation of relevant rules.

Analysis:
1. The case involves an appeal against the order of the Commissioner (Appeals) regarding the duty on scrap of iron and steel and brass. The audit in 2005 revealed a duty demand of Rs. 2,25,082 on the scrap cleared by the appellants during 2003-04. The original authority and Commissioner (Appeals) upheld the duty demand and penalty. The appellants claimed the scrap did not arise from manufacturing excisable goods.

2. The burden of proving excisability lies on the department. The appellants argued that the scrap did not arise from the manufacture of final excisable products. Additionally, they contended that the scrap originated from capital goods installed before 1989-90, although they lacked documentation.

3. The interpretation of Rule 3(5A) of Cenvat Credit Rules was crucial. The appellants cited precedents to support their claim that no amount was payable on scrap arising from capital goods before the introduction of sub-rule 5A in May 2005. The Tribunal noted the lack of segregation of goods and emphasized the department's failure to provide evidence of excisability.

4. The Tribunal considered the absence of evidence regarding the goods' excisability or origin from capital goods. It highlighted the introduction of sub-rule 5A in May 2005, which required payment equal to the duty on transaction value for capital goods cleared as waste and scrap. However, the Tribunal concluded that the department failed to prove excisability, treating the goods as waste and scrap before the rule's introduction.

5. Ultimately, the Tribunal set aside the orders of the lower authorities, ruling in favor of the appellants due to the lack of evidence on excisability and the interpretation of Rule 3(5A). The decision was based on the absence of proof and the application of relevant legal provisions.