2024 (7) TMI 1253 - AT - Central Excise

Levy of of the central excise duty - sale of the old machinery (sold by the appellant) as scrap - Rule 3(5A) in CENVAT Credit Rules, 2004 - eligibility of the cenvat credit of the service tax availed on outward freight under GTA services - place of removal - Extended period of limitation - penalty. Levy of Central Excise Duty - sale of the old machinery (sold by the appellant) as scrap - Rule 3(5A) in CENVAT Credit Rules, 2004 - HELD THAT - The machinery sold was capital goods and the provisions of Rule 3(5A)(b) clearly provides that if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on the transaction value - as observed by the Authorities below, the purchase bill and the sale bill, which are annexed along with the appeal here, do not show any correlation between the goods purchased and sold. The sale bill i.e. invoice no.180 dated 09.07.2016 do not provide any description as to the nature of the capital goods being sold. Though the appellant in the appeal has quoted the affidavit filed by Shri P.K. Mehra, Director of the appellant company to say that the said old and used machinery was sold in the year 2016 through the invoice no.180 dated 09.07.2016. However, neither the affidavit has any date nor does it specifies the period during which Shri P.K. Mehra was working as Director of the appellant company to show his bonafides as to his awareness of the sale and purchase. In any event, the appellant is liable to pay the duty in terms of the statutory provisions of Rule 3(5A)(b). Availing the cenvat credit of service tax paid on outward freight and utilizing the same towards the payment of duty - Place of removal - HELD THAT - The Adjudicating Authority has observed that the appellant had availed the cenvat credit of an input service in ER-I Returns for the month of August, 2014, Feb. 2015, March, 2015, April, 2015, June, 2015, July and August, 2015, however, there was no reversal entries in the ER-I Returns and the service tax payable ledger accounts. Hence, the cenvat credit on outward freight was not admissible to the appellant and is liable to be recovered under the provisions of Rule 14 of CCR, 2014. The appellant having failed to pay the central excise duty and wrongly availed the cenvat credit is liable to pay the interest under Section 11AA of the Central Excise Act, 1944. Extended period of limitation - penalty - HELD THAT - The cenvat credit of service tax taken by the appellant on the outward freight beyond the place of removal was knowingly and deliberately suppressed from the Department with intent to evade payment of duty and hence, the extended period of limitation has been rightly invoked and the penalty imposed thereon. There are no reason to interfere with the impugned order and the same is hereby affirmed - appeal dismissed.

Summary

Issues:
1. Leviability of central excise duty on sale of old machinery as scrap.
2. Eligibility of cenvat credit of service tax availed on outward freight under GTA services.

Issue 1: Leviability of Central Excise Duty on Sale of Old Machinery as Scrap

The appellant, a manufacturer of corrugated boxes, purchased machinery in 1990 without paying excise duty. Subsequently, the appellant sold the old machinery as scrap without paying central excise duty. The issue revolved around the applicability of Rule 3(5A)(b) of Cenvat Credit Rules, 2004, which requires payment of duty on the transaction value if capital goods are cleared as waste and scrap. The Tribunal held that the appellant was liable to pay the duty as per statutory provisions, irrespective of availing cenvat credit at the time of purchase. The lack of correlation between the purchase and sale bills further supported the duty liability under Rule 3(5A)(b). The appellant's argument regarding the non-applicability of the rule was dismissed, and the demand for duty was upheld.

Issue 2: Eligibility of Cenvat Credit of Service Tax on Outward Freight

The appellant availed cenvat credit of service tax on outward freight beyond the factory gate, contrary to the definition of 'input service' under Rule 2(l) of CCR. The rule specifies that outward transportation up to the place of removal qualifies as an input service. As the appellant utilized this credit towards payment of excise duty, which was not permissible due to the actual 'place of removal' being the factory gate, the credit was found inadmissible. The failure to reverse entries in the ER-I Returns and service tax payable ledger accounts indicated wrongful availing of the credit. Consequently, the appellant was held liable to pay back the credit under Rule 14 of CCR, 2014. The deliberate suppression of information to evade duty payment invoked the extended period of limitation and warranted a penalty. The Tribunal affirmed the decision, dismissing the appeal and upholding the demand for duty, interest, and penalty.

In conclusion, the Tribunal ruled in favor of the Revenue on both issues, affirming the demand for central excise duty on the sale of old machinery as scrap and rejecting the eligibility of cenvat credit of service tax on outward freight. The judgment emphasized adherence to statutory provisions and penalized the appellant for wrongful availing of credits and evasion of duty payment.