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TMI Blog2024 (5) TMI 1329X X X X Extracts X X X X X X X X Extracts X X X X ..... nue 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maintained 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. They also did not mention about these transactions in their reports/ returns submitted to the department from time to time. Thus they have willfully suppressed the facts of sale of waste and scrap generated out of Modvated capital goods, as the appellant was availing the facility of Modvat Credit/ Cenvat Credit on Capital Goods from 2011. These clearances were made without issuance of any invoices as provided under Rule 11 of Central Excise Rules, 2002 with the intention to evade payment of due duty. 2.4 Not satisfied with the responses received from the appellant, a show cause notice dated 01.09.2010 was issued to the appellant asking them to show cause as to why:- 1. The aforesaid CENVAT amounting to (Rs 22,82,596/- plus ED Cess Rs 45,651/- HSED Cess Rs 13,548/-) totally amounting to Rs 23,41,795/- should not be demanded and recovered from them under proviso to Section 11A (1) of the Act along with interest @ 13% under Section 11 AB of the Act and, 2. A penalty should not be imposed upon them under the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the duty thereon. (p-5) 7. I find that the sale of waste scrap of capital goods is not under dispute. Regarding leviability of duty on such sold waste and scrap, I shall visit the Notification No.27/2005-CE(NT) dated 16.05.2005, whereby, sub-rule(5A) was inserted in Rule 3 of the Cenvat Credit Rules,2004 which reads as under- Cenvat Credit Rules, 2004 - Seventh Amendment of 2005- In exercise of the powers conferred by section 37 of the Central Excise Act, 1944 (1 of 1944) and section 94 of the Finance Act, 1994 (32 of 1994), the Central Government, hereby makes the following rules further to amend the CENVAT Credit Rules, 2004, namely :- (1) These rules may be called the CENVAT Credit (Seventh Amendment) Rules, 2005. (2) They shall come into force on the date of their publication in the Official Gazette 2 In the CENVAT Credit Rules, 2004, (hereinafter referred to as the said rules), in rule 3,- (A) after sub-rule (5), the following sub-rule shall be inserted, namely :- (5A) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. 7.1 On plane reading of the above added sub-rule, it is clear that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant to substantiate their claim of the said capital goods having become waste and scrap. [Emphasis supplied] 8.1 I observe that the necessary documents and any other material, demonstrating the procurement of capital goods prior to Modvat/Cenvat Scheme and also dismantling those capital goods as claimed, have not been put On record by the appellants. As such there is no correlation with the capital goods claimed as non-cenvated and the quantum of the waste and scrap sold and cleared without payment of duty. 8.2 It is observed that the department has applied Record Based Check in view of Self Removal Procedure and the department works on the basic documents as submitted by the assessee either on their own or called for by the department. It is a set pattern and in no case the department could have any check if the documents are not primarily supplied in respect of any contention or fact. In the instant case the appellants have not supplied the basic documents relating to their contention of 'non-modvated, cenvated waste f scrap and have avoided to assume their responsibility of producing the documents by saying that the burden of proof lies with the department. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Evidence Act which provides as under:- Burden of proving fact to be proved evidence admissible: The burden of proving any fact necessary to be proved in order to enable any person to give evidence of any other fact is on the person who wishes to give such evidence Accordingly party had to prove that the sold scrap were arisen out of non-modvated capital goods. (p-4) 8.4 In view of above observations I am of the considered opinion that it is the party who has preferred appeal challenging the findings of the adjudicating authority and claiming no-duty on waste scrap sold, and therefore, they cannot get away from the responsibility of substantiating their claim with the help of purchase papers etc. relating to the capital goods in question as also statutory Cenvat declaration/return prescribed for capital goods on which Cenvat credit is taken. Basically the appellants are seeking exemption from payment of duty on waste and scrap as an exception to Rule 3(5A) of the Cenvat Credit Rules 2004.Therefore the burden is on them to prove they are not to pay the duty by making out a case that the waste and scrap related to such capital goods on which no Cenvat credit was taken. The Hon' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing out of the old equipments purchased prior to 2000 while they started availing Cenvat Credit of capital goods from the year 2001 when factory resumed operations after the closure. However, the party failed to explain the fact that the sold scrap were generated from the capital goods on which Cenvat Credit were not availed through any documentary evidence. Further, the specific description of items were not provided in the concerned bills of sold scrap to determine their origin and thus it was not practically viable to ascertain whether sold scrap belongs to Cenvatable capital or not. The sub-rule 5A of Rule 3 of the Cenvat Credit Rules, 2004 provides that an amount equal to the duty leviable on transaction value is to be paid on the clearance of capital goods cleared as waste and scrap. It is immaterial whether Cenvat Credit has been taken or not. 4.4 Commissioner (Appeal) has in the impugned order at para 7.1 negated the contention raised in the show cause notice to the effect that the amount equivalent to the duty leviable on transaction value is to be paid on the clearance of capital goods cleared as waste and scrap, immaterial whether Cenvat Credit has been taken or not. Im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence having been relied upon, the issue requires to be considered in the light of the second allegation that the goods have been cleared as waste and scrap have arisen out of capital goods on which the appellants have taken the credit. 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. In this regard, sub-rule 5A of Rule 3 of the Cenvat Credit Rules which was introduced on 16-5-05 reads as under: 5A ... 7. The above provision does not treat the waste and scrap as manufactured goods. It stipulates that the manufacturer who has availed capital goods credit, when clearing the capital goods as scrap, an amount equal to the duty leviable on the transaction value of waste and scrap shall be payable. 4.7 In case of Grasim Industries [2009 (233) E.L.T. 412 (Tri. - Del.)] Delhi bench has held as follows:- 6. We have carefully considered the submissions from b ..... 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