2024 (5) TMI 1329 - AT - Central Excise

CENVAT Credit - sale of scrap generated from working capital goods, without paying an amount equal to the duty leviable on the said transaction value - non-maintenance of any record/ inventory in respect of production generation and clearance/ sale of waste scrap arisen out of Capital goods separately nor paid due duty thereon - contravention of the provisions of Rule 3 (5A) of the Cenvat Credit Rules, 2004 - suppression of facts or not - HELD THAT - Revenue has not produce an iota of evidence to prove the contrary. Both the lower authorities have stated that the burden to prove is on the appellant. The said contention of the authorities is contrary to the law of evidence. The burden to prove the fact lies on the person who asserts the fact. Revenue asserts that the these waste and scrap has arisen from the Cenvated Capital Goods, then the burden is on revenue to establish the same. Only once it is established by the revenue then the burden to prove the contrary will shift on the appellant. Appellant has vide letter dated 11.01.2010 taken the stand that the waste and scrap sold by them has arisen out of the Capital Goods on which no Cenvat Credit was taken. Revenue authorities should have investigated the matter to establish to the contrary. Instead of doing so the show cause notice has been issued stating that it is immaterial whether the CENVAT Credit on the capital goods has been taken or not. Once Commissioner (Appeal) concluded that Rule 3 (5A) is applicable only to the Cenvated Capital goods, he should have dropped the proceedings initiated by this show cause notice. Delhi bench has in the case of KARNAL CO-OPERATIVE SUGAR MILLS LTD. VERSUS COMMR. OF C. EX., PANCHKULA 2010 (11) TMI 268 - CESTAT, NEW DELHI held that ' Admittedly the appellants were not able to produce documents on the ground that they relate to very old period. However, the submissions of the learned Advocate that prior to the amendment dated 16-5-05 to Rule 3 of Cenvat Credit Rules introducing sub-rule 5A no amount is payable on waste and scrap arising out of capital goods even if the credit had been taken requires to be accepted. ' The decision of Hon ble Supreme Court in the case of MYSORE METAL INDUSTRIES VERSUS COLLECTOR OF CUSTOMS, BOMBAY 1988 (5) TMI 42 - SC ORDER , relied in the impugned order is in respect of the claim to an exemption made by the party. It is settled position in law that any person who claims an exemption needs to establish that he is entitled to the said benefit. However in the present case we are not dealing with the claim of an exemption but with the contravention of provision of Rule 3 (5A) of the Cenvat Credit Rules, 2004. The burden to prove the contravention of the provisions of taxing statute is always on the revenue. This decision is distinguishable. There are no merits in the impugned order - appeal allowed.

Summary

Issues Involved:
1. Liability to pay central excise duty on waste & scrap of capital goods.
2. Burden of proof regarding the origin of waste & scrap.
3. Applicability of Rule 3(5A) of the Cenvat Credit Rules, 2004.

Summary:

1. Liability to Pay Central Excise Duty on Waste & Scrap of Capital Goods:
The appellant, engaged in the manufacture of sugar and molasses, was found to have sold scrap generated from working capital goods without paying the duty leviable on the transaction value, in contravention of Rule 3(5A) of the Cenvat Credit Rules, 2004. The Commissioner (Appeal) upheld the demand of Rs 23,41,795/- u/s 11A of the Central Excise Act, 1944, along with interest u/s 11AB and a penalty u/s 11AC read with Rule 25 of the Central Excise Rules, 2002.

2. Burden of Proof Regarding the Origin of Waste & Scrap:
The appellant contended that the waste and scrap sold were generated from capital goods on which no Cenvat credit was taken. However, they failed to provide documentary evidence to support this claim. The adjudicating authority and Commissioner (Appeal) held that the burden of proof was on the appellant to demonstrate that the scrap was from non-cenvatable capital goods. The Tribunal noted that the burden to prove the fact lies on the person who asserts it. Since the revenue asserted that the waste and scrap arose from Cenvated capital goods, it was their responsibility to establish this fact.

3. Applicability of Rule 3(5A) of the Cenvat Credit Rules, 2004:
The Tribunal examined Rule 3(5A) of the Cenvat Credit Rules, 2004, which mandates that if capital goods are cleared as waste and scrap, the manufacturer must pay an amount equal to the duty leviable on the transaction value. The Commissioner (Appeal) concluded that this rule applies only to Cenvated capital goods. The Tribunal found that the revenue did not produce evidence to prove that the waste and scrap were from Cenvated capital goods. The Tribunal cited several precedents, including the case of Karnal Co-Operative Sugar Mills Ltd., which held that the burden of proof is on the department to adduce evidence.

Conclusion:
The Tribunal allowed the appeal, stating that the revenue failed to establish that the waste and scrap were from Cenvated capital goods. The burden of proof was on the revenue to prove the contravention of Rule 3(5A) of the Cenvat Credit Rules, 2004. The Tribunal found no merit in the impugned order and allowed the appeal.