2016 (3) TMI 995 - AT - Central Excise

CENVAT credit on capital goods removed as waste and scrap - Whether the capital goods, if removed, without installation and without putting to use, as waste and scrap will attract duty equal to the amount of credit taken or the duty on the transaction value of the machine sold as waste and scrap - Held that - The facts is not under dispute that the appellant have availed the Modvat Credit on capital goods which was neither installed in the factory of the appellant nor used for the manufacture of final product. The capital goods were without putting into use cleared showing as waste and scrap. The provision for duty liability on removal of capital goods is provided under Rule 57S of erstwhile Central Excise Rules 1944 which clearly provided that if the capital goods are removed without being used the excise duty payable shall in no case be less than the amount of credit that has been allowed. Intention of the legislature is very clear that when the removal of capital goods is without being used is different from the capital goods sold as waste and scrap that means the term sale of capital goods as waste and scrap then the excise duty shall be payable on the transaction value of the waste and scrap. It is to be kept in mind even after use for some time if the capital goods is sold then also the excisable duty is payable in terms of Clause (b) after allowing the deduction of 2.5% of credit taken for each quarter. Therefore when the capital goods is not installed or has not been used its clearance will clearly fall under the clause (a) of Sub-Rule (2) and not under Clause (c). It is therefore of the view, that the appellant is required to pay excise duty on the capital goods cleared without being used in terms of clause (a) of Sub-rule (2) of Rule 57S of the Central Excise Rules, 1944. Accordingly, equal amount of Cenvat Credit which has been availed shall be payable by the appellant. Commissioner by careful application of mind, after interpreting the provisions of rule 57S(2) held that the removal of capital goods in the present case is covered under Sub-rule (2)(a). - Decided against assessee

Issues Involved:
1. Whether duty on capital goods removed without installation and use, as waste and scrap, should be equal to the amount of credit taken or based on the transaction value of the waste and scrap.
2. Applicability of penalty under Rule 57U(6) of the erstwhile Central Excise Rules, 1944.

Issue-Wise Detailed Analysis:

1. Duty on Capital Goods Removed Without Installation and Use:
The core issue is whether the duty on capital goods, removed without installation and use, and sold as waste and scrap, should be equal to the amount of credit taken or based on the transaction value of the waste and scrap. The appellant argued that under Rule 57S(2)(c), when capital goods are sold as waste and scrap, the duty payable should be on the transaction value of the waste and scrap sold. The appellant supported this argument with several judgments, asserting that there is no condition under Rule 57S(2)(c) that capital goods must be installed and used before being sold as waste and scrap.

The Tribunal, however, held that the facts were not in dispute: the appellant had availed Modvat Credit on capital goods which were neither installed nor used in the factory. The capital goods were cleared as waste and scrap without being used. Rule 57S of the erstwhile Central Excise Rules, 1944, was cited, particularly Sub-Rule (2), which specifies the duty liability on the removal of capital goods. According to Rule 57S(2)(a), if capital goods are removed without being used, the excise duty payable shall not be less than the amount of credit allowed. The Tribunal clarified that the removal of capital goods without being used falls under Clause (a) and not Clause (c), which pertains to capital goods sold as waste and scrap after being used. Therefore, the appellant was required to pay excise duty equal to the amount of Cenvat Credit availed.

2. Applicability of Penalty:
The appellant contended that the penalty imposed under Rule 57U(6) was not applicable due to the saving clause under Section 38A of the Central Excise Act, 1944. The Tribunal examined the explanation to Section 38A, which states that any act or omission punishable under the old provisions remains punishable under the new provisions unless explicitly stated otherwise. The Tribunal found that the act of wrong availment of Modvat Credit was punishable under the erstwhile Central Excise Rules, 1944, and thus the penalty provisions were applicable. The judgments cited by the appellant were distinguished as they involved different facts and were not relevant to the present case.

The Tribunal upheld the findings of the Commissioner, who had determined that the appellant had removed the capital goods without putting them to use and was required to pay duty under Rule 57S(2)(a). The Commissioner also found that the removal of the capital goods came to the department's knowledge only during an audit, indicating a deliberate intention to evade payment of duty. Thus, the penalties under Rule 57U of the erstwhile Central Excise Rules, 1944, read with Section 38A of the Central Excise Act, 1944, were rightly imposed.

Conclusion:
The Tribunal dismissed the appeal, affirming the Commissioner's order that the appellant must pay excise duty equal to the amount of Cenvat Credit availed for the capital goods removed without being used. The imposition of penalties was also upheld due to the deliberate intention to evade duty. The appeal was dismissed, and the impugned order was deemed sustainable.

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