2018 (7) TMI 1778 - AT - Central Excise

CENVAT Credit - Clearance of waste and scrap arisen out of old plant and machinery - whether clearance of cenvatable capital goods as such or not? - extended period of limitation - Held that - According to the well settled principal of law the one who alleges has to prove , it is for the Revenue to prove that the scrap in question had arisen out of the capital goods which were the one in respect of which the appellant has availed the credit. Also, the scrap is in the nature of worn out items of the plant and machinery, which has arisen during the course of repair and maintenance - The Hon ble Supreme Court in the case of Grasim Industries Limited vs. Union of India 2011 (10) TMI 2 - SUPREME COURT OF INDIA has observed that such type of scrap and waste arising from repair and maintenance of capital goods are not dutiable. Extended period of limitation - Held that - It is not a case for invocation of longer period of limitation inasmuch as the waste and scrap was cleared on the basis of invoices and as such no mala fide can be attributed to the assessee, in the absence of any positive evidence to reflect upon any suppression or mis-statement. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether the waste and scrap cleared by the appellants, arising from old plant and machinery, is liable to duty payment?
2. Whether the demand raised by the Revenue on the appellants is within the period of limitation?
3. Whether the appellants are entitled to avail Cenvat Credit on the waste and scrap cleared?

Analysis:
1. The appellants, engaged in sugar manufacturing, cleared waste and scrap from old machinery during a specific period. The Revenue contended that such scrap, arising from duty paid capital goods, should be cleared with duty payment. The Original Adjudicating Authority confirmed a demand of around ?8.31 lakhs with an equal penalty, upheld by the Commissioner (Appeals). The appellants argued that the scrap was second-hand worn-out items, not requiring duty payment or Cenvat Credit reversal. The Appellate Authority's reasoning was challenged, stating the Revenue must prove the scrap's origin from capital goods. Additionally, citing a Supreme Court case, it was argued that scrap from repair and maintenance of capital goods is not dutiable unless the entire machinery is sold.

2. The issue of the demand's limitation period was raised by the appellants. They contended that the waste and scrap clearance was based on invoices, with no evidence of mala fide intent. It was argued that the longer period of limitation should not apply due to the absence of any suppression or misstatement. The Tribunal agreed with the appellants, noting no grounds for invoking the longer limitation period. The absence of evidence reflecting any misconduct led to the decision to set aside the impugned order and allow the appeal with consequential relief to the appellants.

In conclusion, the judgment favored the appellants, emphasizing the Revenue's burden to prove the origin of the scrap from duty-paid capital goods. The Tribunal rejected the demand for duty payment on the scrap and ruled in favor of the appellants on the issue of limitation period, providing relief based on the absence of evidence supporting any misconduct.