Customs, Excise & Service Tax Appellate Tribunal West Zonal Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Excise Appeal No.10026 of 2021

(Arising out of OIA-VAD-EXCUS-002-APP-322-2019-20 dated 17/09/2019 passed by Commissioner ( Appeals ) Commissioner of Central Excise, Customs and Service Tax- VADODARA-II)

 

GUJARAT ALKALIES AND CHEMICALS LTD

VERSUS

C.C.E. & S.T.-VADODARA-II

APPEARANCE:

Shri Amit Laddha, Advocate for the Appellant

Shri. Vijay G. Iyengar, Assistant Commissioner (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

Final Order No. A/ 10918 /2023

 

 

 

RAMESH NAIR

DATE OF HEARING: 15.12.2022 DATE OF DECISION: 13.04.2023

 

 

The brief facts of the case are that during the course of CERA Audit of appellant’ record it was found that the appellant have received the insurance claim of Rs. 1,69,05,000/- . On scrutiny of the claim, it was found that during dismantling basket and shifting to workshop, the basket swung and hit the adjacent steel portion of holding stand due to which the prill stand system was damaged. The surveyor vide its report No.01/367/12-13 dated 06.02.2015 reported that the damaged plants machineries were not usable. The appellant had availed the cenvat credit on such damaged capital goods. Thus the department is of the opinion that the machines so damaged on which insurance claim has been received  by the appellant is to be treated as cleared after being put to use and the appellant is required to reverse the cenvat credit in terms of sub rule  5 (A) of Rule 3

 

of Cenvat Credit Rules, 2004 Accordingly the SCN dated 11.06.2018 was issued for demand of Central Excise Duty and reversal of cenvat credit of Rs. 29,36,123/- along with interest and proposal to impose penalty. The said show cause notice was adjudicated vide Order-In-Original whereby the demand was confirmed. Being aggrieved by the said Order-In-Original the appellant filed appeal before the Commissioner (Appeals) who remanded the matter to the Adjudicating Authority for limited purpose of arriving at the correct quantification of the demand. However, on merit it was held that the appellant is liable to pay cenvat amount in terms of sub – rule 5(A) of Rule 3. The appellant being aggrieved by the order of the Commissioner (Appeals) filed the present appeal.

2. Shri Dhaval Shah, LearnedCounsel appearing on behalf of the Appellant submits that if the capital goods got damaged the same was not usable. Therefore, the damaged machines was sold as waste and scrap for which the invoice was also issued declaring the goods as waste and scrap. He submits  that even as per the survey for insurance claim it was categorically declared that the capital good is not usable, for that reason only the appellant have been sanctioned the insurance claim. This fact goes on establishing that the capital goods on which credit was taken has been cleared as waste and scrap. Accordingly the duty paid on transaction value of the said machine cleared as waste and scrap is legal and correct. In support of his submission he placed reliance on the following judgments :-
   • BIOPACINDIA CORPORATION LTD -2008 (224)ELT 548 (TRI. AHMD)
   • CCE BIOPAC INDIA CORPORATION LTD – 2010 (258) ELT 56 (GUJ.)
   • STEELBIRDHI TECH INDIA LTD – 2015 (322) ELT 752 (TRI. DEL)

 

3. Shri Kalpesh P Shah, Learned Assistant Commissioner appearing on behalf of the Revenue reiterates the finding of the impugned order.

 

4. I have carefully considered the submission made by both sides and perusedthe records. I find that the fact of the case is not under dispute that the machine was  used for almost 4 years  thereafter it got damaged, the appellant also filed the insurance claim and after survey when the surveyor was satisfied the machines are not usable, the insurance company sanctioned the  insurance claim. It is also fact in record that the appellant have cleared such damaged capital goods as waste and scrap. The relevant provision of sub- rule (5A) of Rule 3 is reproduced below:-

“(a) if the capital goods, on which CENVAT credit has been taken, are removed after being used, the manufacturer or provider of output services shall pay an amount equal to the CENVAT Credit taken on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:-

• for computers and computer peripherals:

 

for each quarter in the first year @ 10%

for each quarter in the second year @ 8%

for each quarter in the third year @ 5%

for each quarter in the fourth and fifth year @ 1%

 

• for capital goods, other than computers and computer peripherals @ 2.5% quarter:

Provided that if the amount so calculated is less than the amount equal to the duty leviable on transaction value, the amount to be paid shall be equal to the duty leviable on transaction value.

(b) If the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.

 

 

 

From the above it can be seen that the removal of used capital goods has been divided into two parts :-

• when the used capital goods in working condition if removed , the amount of cenvat credit shall be calculated by reducing the percentage points calculating by straight line method as specified .

 

• When the capital goods is cleared as waste and scrap the assesse shall pay the amount equal to the duty leviable on the  transaction value of such capital goods cleared as waste and 

4.1 In the present case the only issue to be decided as to whether the capital goods on which the cenavt credit was availed has been cleared as usable capital goods or waste and scrap. As the facts narrated above  in as much as the appellant have cleared the capital goods as waste and scrap coupled with the fact of insurance claim it is absolutely beyond doubt that the capital goods became waste and scrap as the same is not usable for the intended purposes. In such case clearance of capital goods clearly falls under Rule 3 (5A)(b) therefore, the appellant have rightly paid the amount equal to the duty leviable on transaction value of the capital goods. Hence, the impugned order is not sustainable.

5. Accordingly, the impugned order is set aside. Appeal is allowed with consequential relief.

(Pronounced in the open court on 13.04.2023)

 

(RAMESH NAIR) MEMBER (JUDICIAL)

 

 

 

Geeta