2023 (10) TMI 868 - AT - Central Excise

Levy of Excise Duty - sale of fixed asset (plant and machinery) - applicability of Sub Rule (5) of Rule 3 of CCR, 2004 - time limitation - HELD THAT - Rule 3(5) makes it abundantly clear that it shall apply to such inputs or capital goods on which Cenvat Credit has been taken and that such capital goods have been sold as such. There is no denial to the fact that the goods which have been sold by the appellant were such assets which have been used by the appellants since its purchase till the date of those were sold. Resultantly, one condition of the above quoted provision i. e. goods are removed as such stands un-complied with the meaning of the expression as such has been clarified by the Larger Bench of this Tribunal in the case of MODERNOVA PLASTYLES PVT. LTD. VERSUS COMMISSIONER OF C. EX., RAIGAD 2008 (10) TMI 51 - CESTAT, MUMBAI . The other condition for the applicability of rule 3 (5) of Cenvat Credit Rules, 2004 is that the appellant would have availed the Cenvat Credit on the capital goods in question. The said condition is the bone of contention for the impugned appeal - it is observed that merely from the balance-sheet entries the department has presumed that the appellant would have availed the Cenvat Credit on the capital goods as were removed in the afore-mentioned financial years. Thus, the initial burden was of the Department / Revenue to prove the said presumption. Department has not placed on record any such document nor there is any specific allegation about any specific amount to ever been availed by the appellant as Cenvat Credit. The capital goods which are shown adjusted in the financial year 2015-16 are mentioned to have been purchased in the year 1986-89 and that they could not have been sold even as scrap. There is no evidence produced by the department to rebut or falsify the said submission - the allegations of the Department in the Show Cause Notice were merely presumptive and Department could not produce any evidence to prove those presumptions. The order has wrongly held the purchase invoices as sales invoices. Time Limitation - HELD THAT - The Show Cause Notice is miserably silent about any allegation of malafide, willful suppression etc. on the part of appellant to evade the impugned amount. Hence any basis for invoking the extended period of limitation is found absolutely missing in the present case. Resultantly, the Show Cause Notice itself gets hits by the time limitation. Appeal allowed.

Summary

Issues:
The issues involved in this case include the alleged non-payment of Central Excise duty on the sale of fixed assets by the appellant, the invocation of Rule 3(5) of Cenvat Credit Rules, 2004, and the burden of proof regarding the availing of Cenvat Credit on the capital goods.

Alleged Non-Payment of Central Excise Duty:
The Department alleged that the appellant sold their plant and machinery without paying Central Excise duty, leading to a demand for recovery of Rs.10,96,261/- along with interest and penalties. The appellant contended that no capital asset was sold as such, and the values shown in the balance sheets were nominal, intending to write off old capital goods that were not even sold as scrap. The appellant argued that no Cenvat Credit was availed on the capital goods purchased in specific financial years, thus no reversal was required. The Department, however, claimed that the burden of proof was on the appellant to show non-availment of Cenvat Credit, which they failed to do.

Invocation of Rule 3(5) of Cenvat Credit Rules, 2004:
The Department invoked Rule 3(5) of Cenvat Credit Rules, 2004, which requires payment of an amount equal to the credit availed on inputs or capital goods that are removed as such from the factory and sold. The Tribunal clarified that this rule applies only when Cenvat Credit has been taken on the capital goods sold. The appellant provided invoices as evidence, showing that the goods in question were purchased, not sold, and there was no mention of excise duty in the invoices. The Tribunal held that the Department failed to prove that Cenvat Credit was availed by the appellant on the capital goods in question, thus dismissing the demand based on Rule 3(5).

Burden of Proof on Availing Cenvat Credit:
The Tribunal emphasized that the burden of proof regarding the availing of Cenvat Credit rested with the Department. The appellant's response to the Show Cause Notice, supported by purchase invoices, indicated that no Cenvat Credit was availed on the capital goods. The Tribunal found that the Department's allegations were presumptive, lacking evidence to support their claims. Moreover, the Show Cause Notice was issued beyond the normal period without alleging malafide or willful suppression by the appellant, rendering it time-barred. Consequently, the Tribunal set aside the order and allowed the appeal.