2022 (1) TMI 710 - AT - Central Excise

CENVAT Credit - duty paying documents - ISD invoices - management and repair services - clearance of waste and scrap (old empty soda bags), guddar, old PVC drum, old empty bags, etc. - scrap cleared by the appellant are not manufactured scrap or scrap arising in the course of manufacture of final products or bye-products - demand under the provisions of Rule 9 (6) of CCR - HELD THAT - The disallowance by the Court Below is for vague reasons. The cenvat credit received by the appellant unit through ISD invoices is wholly allowable in respect of the repair and maintenance services received. Further, the Court Below have erred in allowing part of such services and have disallowed the part of amount for no ostensible reasons - the amount disallowed is bad and the ground is allowed in favour of the appellant. Demand of 6% on clearance of waste and scrap - Rule 6 of CCR - HELD THAT - The provisions of Rule 6 is attracted, only where the manufacturer clears both manufactured dutiable and exempted goods. Admittedly, the scrap cleared by the appellant are not manufactured scrap or scrap arising in the course of manufacture of final products or bye-products - the provisions of Rule 6 are not attracted in the facts and circumstances - this ground is also allowed in favour of the appellant. The demand of duty and penalty as well as interest set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Disallowance of cenvat credit on ISD invoices for management and repair services.
2. Upholding demand under Rule 9(6) of CCR on clearance of waste and scrap.

Analysis:
1. The first issue revolved around the disallowance of cenvat credit on ISD invoices for management and repair services. The appellant, a manufacturer of dutiable goods, availed services from a statutory body for maintenance of road, drainage, and street lights. The Adjudicating Authority disallowed the credit, citing services received beyond the factory premises. However, the Commissioner (Appeals) interpreted the services as part of lease/rent charges, making them eligible inputs under the definition of 'input service.' The Tribunal, relying on precedent rulings, allowed the credit, emphasizing the indirect relation of maintenance services to the business premises, thus overturning the disallowance.

2. The second issue pertained to the demand under Rule 9(6) of CCR on the clearance of waste and scrap. The Court below applied Rule 6 of CCR, linking it to the clearance of exempted goods, including non-excisable goods. The appellant argued that Rule 6 only applies to manufactured exempted goods, not non-manufactured items like waste and scrap. Citing a Board's Circular and legal precedent, the appellant contended that no duty is payable on such items. The Tribunal agreed, ruling that Rule 6 does not apply to non-manufactured scrap, thereby allowing the appeal and setting aside the demand.

In conclusion, the Tribunal allowed the appeal, setting aside the impugned order confirming duty, penalty, and interest, granting consequential benefit to the appellant. The judgment clarified the eligibility of cenvat credit on maintenance services and the inapplicability of Rule 6 of CCR to non-manufactured waste and scrap, providing a comprehensive analysis and resolution for the issues raised in the appeal.