The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that corrugated boxes for packaging glassware which are non-cenvatable are not liable to Excise Duty.
Shreno Ltd, the appellants are engaged in the manufacture of glass and glassware items. During the audit, it was noticed that some value against the sale of scrap is appearing in the balance sheet of the appellant. Accordingly, the range superintendent asked the appellant to furnish the details of all scrap cleared from their factory premises that reflected in their balance sheets for the period from 2008-09 to 2012-13 upto ( January,2013 ).
The appellant submitted the details of all the scrap cleared by them from factory vide letter dated 11.03.2013, wherein they have clarified that they have discharged the Excise Duty in respect of the manufacturing scrap and scrap generated out of cenvatable input/capital goods. They have also clarified that other than these two types of scrap, since they are not liable to pay the duty, they have not paid the duty.
However, Show Cause Notice came to be issued, wherein the demand of Excise Duty on all the scraps was raised. The Adjudicating Authority confirmed the demand and Commissioner( Appeals ) upheld the same by order in appeal.
Shri Saurabh Dixit, Counsel appearing on behalf of the appellant at the outset submitted that the Show Cause Notice has demanded the Excise Duty despite the appellant clarified that they have not paid duty on the scrap which is other than manufacturing scrap and cenvateable scrap. He submitted that the scrap which is not generated during manufacture but general scrap on which no Cenvat Credit was taken excise duty is not payable. Accordingly, the Show Cause Notices are void and illegal.
Shri Prakash Kumar Singh, Superintendent ( Authorized Representative ) appearing on behalf of the revenue reiterated the finding of the impugned order.
A two-member bench comprising of Mr Ramesh Nair, Member ( Judicial ) and Mr Raju, Member ( Technical ) observed that the demand was raised on all the scrap sold by the appellant value of which is reflected in the balance sheet. The appellant while giving the information, as asked by the department vide their letter dated 06.03.2013, in their letter dated 11.03.2013 categorically stated that they have paid the excise duty on manufacturing scrap nor cenvatable scrap, they also stated that on the general scrap which is neither manufacturing scrap nor cenvatable scrap, they have not paid the duty.
In absence of any such investigation the allegation made in the Show Cause Notice is bald and without any support of any evidence. The appellant have cleared the scrap which is neither generated from the manufacturing nor generated from the cenvatable input or capital goods. Therefore, the same is clearly not liable to any duty.
The CESTAT observed that before invoking Rule 3(5A) of the Cenvat Credit Rules, 2004, it is necessary for the Revenue to establish that items of capital goods are cleared as waste and scrap and on which the appellant has availed Cenvat credit. Unless Revenue establishes that they availed Cenvat credit on the capital goods which are being removed as waste 5 Excise Appeal No. 13128 of 2013 and scrap, provisions of Rule 3(5A) of Cenvat Credit Rules, 2004 cannot be invoked.
The process of repair and maintenance of the machinery of the cement manufacturing plant, in which M.S. scrap and Iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is the excisable end product, as since welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc. which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end product.
The issue of getting a new identity as M.S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of the end product.
While allowing the appeal, the CESTAT set aside the demand raised in the SCN.
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