2024 (11) TMI 988 - AT - Central Excise

CENVAT Credit on removal of waste and scrap as such - after use of plant and machinery removal of the same as used plant and machinery attract duty by deducting the depreciation as provided in Rule 3(5) of Cenvat Credit Rules or will be treated as removal of waste and scrap of capital goods attracting duty on transaction value in terms of Rule 3(5A) of Cenvat Credit Rules - denial of credit on the ground that M.S. Window Section cleared as such without any manufacturing process carried on such M.S. Window Section - shortage of 30.123 MT of Billets which was used in the furnace and subsequently dismantled and cleared in June, 2008. Whether after use of plant and machinery removal of the same as used plant and machinery attract duty by deducting the depreciation as provided in Rule 3(5) of Cenvat Credit Rules or will be treated as removal of waste and scrap of capital goods attracting duty on transaction value in terms of Rule 3(5A) of Cenvat Credit Rules? - HELD THAT - It is found that merely because the plant machinery was sold in the Metric Ton and the buyer is the scrap dealer that alone cannot establish that the plant and machinery sold by the appellant is in the form of waste and scrap. As per the invoices raised by the appellant it is observed that in some of the invoices, the description clearly shown as old and used iron scrap. However, in some of the case it is declared as old and used machinery. From the two sample invoices, it is observed that some of the goods were cleared as waste and scrap and some of the capital goods were cleared as old and used machinery without mentioning steel scrap. Therefore, the entire matter needs to be reconsidered after verification of facts on the basis of each invoice and wherever, the description of the capital goods is mentioned as waste and scrap, the same is liable to excise duty on the transaction value and in case of description mentioned as old and used capital goods the same shall be liable to duty after allowing the depreciation as prescribed in the Rules. The adjudicating authority shall also consider the submission of the appellant that at the relevant time there was no recovery proceeding which was brought in this statute only by Notification No.03/2013- C.E. (N.T.) dated 01.03.2013. Whether this Cenvat Credit is liable to be denied on the ground that M.S. Window Section cleared as such without any manufacturing process carried on such M.S. Window Section? - HELD THAT - It is the admitted fact that the appellant have cleared the M. S. Window Section involving Cenvat Credit of Rs.19,86,317/-on payment of duty amounting toRs.27,93,234/-, therefore, the amount of Cenvat Credit of Rs.19,86,317/-stands reversed/ paid by the appellant. On this ground the demand of Rs.19,86,317/- and consequent penalty and interest if any shall not sustain. Whether demand of Cenvat Credit is correct on the ground of shortage of 30.123 MT of Billets which was used in the furnace and subsequently dismantled and cleared in June, 2008? - HELD THAT - It is found that the stand of the appellant is that at the time of use of billets in the foundation of the furnace, they have reversed the Cenvat Credit. However, no evidence in respect of such reversal was brought here. Therefore, this factual aspect also needs to be verified by the adjudicating authority while passing denovo order. The matter relates to the demand of Rs.54,38,305/- and Rs.Rs.1,04,249/-,it is remanded to the adjudicating authority and the demand of Rs.19,86,317/- on M.S. Window Section is set aside. The appeal is disposed of.

Summary

Issues involved:
1. Whether removal of plant and machinery as used machinery attracts duty by deducting depreciation or as waste and scrap attracting duty on transaction value.
2. Whether Cenvat Credit is liable to be denied on M.S. Window Section cleared without any manufacturing process.
3. Whether demand of Cenvat Credit on 30.123 MT of Billets is correct due to shortage and subsequent clearance.

Analysis:

Issue 1:
The appellant argued that the plant and machinery were cleared as old and used machinery, not waste and scrap, thus attracting duty by adopting the depreciation method. They contended that the duty demand cannot be based on transaction value if no evidence proves the clearance as waste and scrap. They also highlighted the absence of a recovery mechanism at the relevant time, which was later introduced by a notification. The Tribunal found discrepancies in the invoices, some describing goods as waste and scrap and others as old and used machinery. It directed a reevaluation based on each invoice to determine the appropriate duty liability.

Issue 2:
Regarding the M.S. Window Section, the appellant cleared it without manufacturing process but paid duty and availed Cenvat Credit. The appellant argued that since duty was paid and Cenvat Credit utilized, no further demand should be raised. The Tribunal agreed, noting that the duty amount was paid, and the Cenvat Credit was effectively reversed or paid by the appellant, resulting in a revenue-neutral situation.

Issue 3:
The demand for Cenvat Credit on the Billets was contested by the appellant, stating that the credit was already reversed when the billets were used in the furnace foundation. However, the Tribunal noted the lack of evidence regarding this reversal and directed the adjudicating authority to verify this aspect during the reevaluation process.

In conclusion, the Tribunal remanded the matter related to the demand on plant and machinery and Billets to the adjudicating authority for further examination. The demand on M.S. Window Section was set aside. The decision was pronounced on 21.11.2024.