2016 (5) TMI 993 - AT - Central Excise

Correctness of confirmation of recovery of an amount as duty - Rule 3(5A) of Cenvat Credit Rules, 2004 - Waste and scrap of Iron and Steel cleared - Scrap items have emerged during the miscellaneous construction activity inside the factory and on these items credit was never taken as capital goods - Held that - I find that to counter the categorical assertion of the appellant that these scrap materials were not connected to any capital goods on which credit has been availed no enquiry or finding has been recorded by the lower Authorities. To apply above-mentioned Rule, it is necessary to give a finding that the capital goods on which the credit was availed are cleared as waste and scrap. Such assertion with supporting evidence is not available in the impugned order. Accordingly the same could not be sustainable. - Decided in favour of appellant

Summary

Issues: Recovery of Cenvat credit on waste and scrap of Iron and Steel under Rule 3 (5A) of Cenvat Credit Rules, 2004.

Analysis:
1. The appeal challenged the order of the Commissioner (Appeals) regarding the recovery of Cenvat credit on waste and scrap of Iron and Steel under Rule 3 (5A) of Cenvat Credit Rules, 2004. The appellants, engaged in the manufacture of Processed Fabrics and laminated fabrics, availed credit on goods and services as per the rules. The Original Authority confirmed a demand of ?2,74,983/- and imposed an equal amount of penalty. The Commissioner (Appeals) upheld the original order, leading to the appeal.

2. The main issue for decision was the correctness of confirming the recovery amount as duty under Rule 3 (5A) of Cenvat Credit Rules, 2004. The appellant argued that the scrap items in question emerged during miscellaneous construction activity and were not items on which credit was taken as capital goods. They provided a certificate to support this claim, contending that the demand was based on vague presumptions without factual basis. However, the lower Authorities did not record any findings or conduct an enquiry to counter the appellant's assertions.

3. The learned Authorized Representative argued that the lower Authorities correctly applied the Cenvat Credit Rules as the scrap materials were cleared on consideration, making duty under transaction value payable. The Tribunal noted that no finding was made by the lower Authorities to establish that the capital goods on which credit was availed were cleared as waste and scrap. Without supporting evidence, the application of the Rule could not be sustained. Consequently, the impugned order was set aside, and the appeal was allowed.

This judgment highlights the importance of proper findings and evidence in cases involving the recovery of Cenvat credit on waste and scrap under the Cenvat Credit Rules, 2004. It emphasizes the necessity for authorities to establish a clear connection between the scrap materials and the capital goods on which credit was availed before imposing such demands.