2019 (1) TMI 663 - AT - Central Excise

Clandestine removal - removal of scrap of old and used moulds under job work challans - Not. No. 67/95 and Not. No. 214/86-CE - whether or not waste and scrap of CI moulds generated during the course of manufacture of final products can be converted into fresh CI moulds for being used in the factory of appellant itself without payment of duty within the framework of N/N. 67/95 dated 16.03.1995? - time limitation. Held that - It is clear from the Notification that the capital goods produced in the factory of consumption are exempted. The view that captively consumed capital goods cannot be treated in the excluded category of final product mentioned in the above said proviso would generally negate exemption specifically given under serial No. (i) to captively consumed capital goods. Above all, the aforesaid exemption appears to have been extended so as to avoid multiple stages of taxation and taking credit in regard to goods manufacture and utilised in the same factory. The Notification shall be applicable only to the goods in respect of which the suppliers of raw materials or semi finished goods give an undertaking to Commissioner or Central Excise Office having jurisdiction over the factory of the job worker - The allegations against the appellant have been confirmed only for want of such undertaking - Held that - Central Board of Excise & Customs clearly says that merely procedural lapses be not allowed to defeat the modvat credit benefit, if substantive conditions about payment of duty and user of goods in manufacture of end product in factory are fulfilled - In view of the admitted facts, there is sufficient compliance by the appellant qua the substantial liability as laid in the Notification relied upon is concerned. Mere lack of sending an intimation is a procedure which is mere directry. Denying the substantial benefit to the appellant on merely a procedural lapse is unjustified on the part of the adjudicating authority below. Time Limitation - Held that - It is the onus of the Department to prove that assessee had deliberately avoided payment of duty which is payable in accordance of law - the appellant was not liable to make the payment of duty in view of the exemption vide Notification No. 67/95 qua the capital goods consumed in captive use after being reprocessed. Resultantly, there appears no alleged mensrea on the part of the appellant to evade duty - demand is time barred. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Alleged evasion of central excise duty by removing scrap under job work challans, applicability of Notification No. 67/95 dated 16.03.1995, whether waste and scrap can be converted into fresh capital goods without duty payment, procedural lapses in obtaining undertaking for job work, invocation of extended period of limitation for alleged malafide intent.

Analysis:

1. The appellant, engaged in manufacturing MS ingots, faced allegations of evading central excise duty by removing scrap under job work challans. A show cause notice (SCN) was issued proposing recovery of cenvat credit and excise duty. The Order-in-Original confirmed the proposal, leading to an appeal before the Commissioner (Appeals) and subsequently to the Tribunal.

2. The appellant argued that waste and scrap were used within the factory for production of capital goods, thus exempt from duty payment under Notification No. 67/95. They contended that the allegations of irregular clearance were unfounded and relied on precedents to support their case.

3. The Tribunal examined the Notification exempting captively consumed capital goods and inputs within the factory of production. It noted that the exemption aimed to avoid multiple taxation stages and facilitate credit for goods manufactured and used in the same factory.

4. The Commissioner (Appeals) held that the appellant irregularly cleared waste and scrap under job work challans to evade duty. However, the Tribunal found this finding contrary to the Notification's scheme, as it would result in unnecessary duty payment and credit availing.

5. The Tribunal emphasized that procedural lapses, such as not obtaining an undertaking for job work, should not override substantial compliance with duty payment and usage conditions. It cited legal principles stating that procedural requirements should not defeat the purpose of justice.

6. Regarding the limitation period, the Tribunal ruled that the alleged evasion was revenue-neutral due to cenvat credit mechanisms, negating malafide intent. It highlighted that the onus is on the Department to prove deliberate avoidance of duty payment, which was not established in this case.

7. Ultimately, the Tribunal found the demand time-barred and unsustainable, overturning the Commissioner (Appeals) findings. The Order was set aside, and the appeal was allowed in favor of the appellant.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, relevant legal provisions, and the Tribunal's reasoning leading to the decision in the case.