2016 (3) TMI 561 - AT - Central Excise

Duty demand on the removal of scraps - assessee availed CENVAT credit on the capital goods - Held that - As find from the statement of Shri D. C. Goyal, General Manager that they were unable to segregate pertaining to the scrap of capital goods on which they have taken CENVAT credit from those normal scraps. It is revealed from the record that the appellant availed Cenvat credit on the capital goods, which were cleared as scrap materials. The claim of the appellants that they have not availed Cenvat credit on capital goods of scrap material, required to be established by them. Thus find both authorities below had examined the issue in detail and thereafter modified the demand. If the appellant fails to demonstrate that they had not used CENVAT credit on the scrap of the capital goods, they are liable to pay duty on the clearance on such scrap material. The appellant had not disclosed the clearance of scrap to the Department and therefore, extended period of limitation would be invoked. In view of the above discussions, the demand of duty alongwith interest and penalty is upheld. Both the authorities below had not given option to pay penalty 25% of the duty under section 11 AC of the Act. The appellant is entitled to pay penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of this order. The appeal filed by the appellant is disposed of in the above terms.

Summary

Issues:
- Duty on clearance of waste and scrap of capital goods
- Availment of CENVAT credit on capital goods
- Barred by limitation

Analysis:
1. Duty on clearance of waste and scrap of capital goods:
The appellants, engaged in manufacturing paper, were found to have cleared M.S. Scrap of civil work and M.S. Scrap of capital goods without paying duty on the clearance of waste and scrap of capital goods. The Revenue contended that duty should be paid on the transaction value of scrap of machineries of capital goods as CENVAT credit was availed on the capital goods. The Adjudicating Authority confirmed the demand of Central Excise Duty, which was later modified by the Commissioner (Appeals) to a reduced amount. The Tribunal upheld the demand of duty along with interest and penalty, emphasizing the need for the appellant to demonstrate non-availment of CENVAT credit on the scrap of capital goods.

2. Availment of CENVAT credit on capital goods:
The appellant argued that they had not utilized CENVAT credit on capital goods, hence there was no basis for demanding duty on the removal of scraps. The appellant failed to establish that they had not availed CENVAT credit on the scrap of the capital goods. The Tribunal observed that the appellant's claim needed to be substantiated, especially since they had not disclosed the clearance of scrap to the Department. Consequently, the Tribunal upheld the demand of duty, interest, and penalty, holding the appellant liable to pay duty on the clearance of such scrap material.

3. Barred by limitation:
The appellant contended that the demand was barred by limitation. However, the Tribunal invoked the extended period of limitation since the appellant had not disclosed the clearance of scrap to the Department. The Tribunal directed the appellant to pay penalty of 25% of the duty along with the entire amount of duty and interest within 30 days from the date of communication of the order. The appeal filed by the appellant was disposed of accordingly.