[Order per : Justice Ajit Bharihoke, President (Oral)]. - The appellant is seeking waiver of the condition of pre-deposit of duty of Rs. 5,62,887/- along with interest as also penalty of equal amount as a pre-condition to hearing of the appeal.
2. Briefly the relevant facts for disposal of stay application are that the appellant is a manufacturer of industrial gases. During the period 2005 to 2009, the appellant sold waste and scrap worth Rs. 38,56,540/- but did not pay any excise duty.
3. The Department was of the view that since the appellant has availed the benefit of Modvat credit in respect of the capital goods under Rule 3(5A) of the Cenvat Credit Rules, 2004, the appellant was supposed to pay the excise duty on waste and scrap sold by the appellant. Accordingly, show cause notice was issued to the appellant which was contested. The jurisdictional Joint Commissioner, Allahabad after due hearing took the view that Rule 3(5A) of Cenvat Credit Rules, 2004 was applicable to the appellant and confirmed the duty demand of Rs. 5,62,887/- along with interest. He also imposed equal amount of penalty upon the appellant.
4. It is submitted by the learned Counsel for the appellant that the plea of the appellant before jurisdictional Joint Commissioner that he had not availed modvat credit in respect of capital goods corresponding to waste and scrap, therefore, Rule 3(5A) of Cenvat Credit Rules, 2004 was not attracted as such he was not required to pay the excise duty on the scrap and waste sold during the period in question. It is also submitted that the aforesaid plea was rejected by the Joint Commissioner without any basis, without enquiring into fact whether or not the appellant had actually taken Modvat credit in respect of capital goods/machinery corresponding to the waste and scrap. Learned Counsel submits that while confirming the Adjudicating Authority did not consider the fact that there was no evidence on record to support the demand. Thus, it is concluded that the order in appeal is not sustainable in law and the appellant has a strong prima facie case for waiver of the condition of pre-deposit.
5. Shri N. Pathak, learned A.R. for Revenue has argued in support of the impugned order and referred to the draft copy of the audit report wherein the auditor has inter alia observed thus :-
“The assessee invariably takes credit of duty paid on capital goods. As per the Rule 3(5A) of Cenvat Credit Rules, 2004 inserted under Notification No. 27/2005, dated 16-5-2005, if capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. The above capital goods of MS scrap are mostly oxygen plant scrap. It was verbally informed to audit, that plant machines of oxygen plant are normally changed after 7 - 8 years of use & replaced by new one.
Hence all the above scraps of capital goods have been generated out of use of modvated capital goods. There is no evidence on sale invoice about the non-modvated nature of capital goods scrap. Party is therefore liable to pay the duty of Rs. 5,62,887/- = (Rs. 58,187/- + Rs. 5,04,700/-) on sale of capital goods scrap, along with interest, without any delay.”
6. In view of the above, the learned A.R. submits that from the above observation in audit report, it is apparent that as per oral information given by the appellant, the plant and machinery of oxygen plant are normally replaced after a period of 7 to 8 years, meaning thereby that latest plant relating to the disputed period must have come into place sometime in 2000 when Modvat scheme was already in operation and the appellant must have taken Modvat credit in respect of the capital investment relating to oxygen plant. Thus, it is submitted that the adjudicating authority has rightly confirmed the demand and the appellate authority has rightly rejected the appeal.
7. We have considered the rival contentions and perused the records. It is well settled that the onus of establishing that the assessee is liable to pay excise duty is on the Department. Perusal of the adjudication order would show that it is not based upon a concrete evidence but on the assumption that the appellant must have taken Modvat credit in respect of the capital goods corresponding to the waste and scrap. There is nothing on record to indicate if the modvat credit account of the appellant was scrutinized before coming to the conclusion that the waste and scrap which are the subject matter of this appeal correspond to investment in capital goods i.e. plant and machinery relating to which modvat credit had been taken. In the absence of any such evidence, we find that the appellant has been able to make out a strong prima facie case for waiver of the condition of pre-deposit of the duty, interest and penalty. No doubt, while deciding the request for waiver, the Tribunal is also required to consider the interest of the Department, we however do not find this to be a case only of partial waiver pre-deposit of demand, particularly when learned A.R. has not been able to show any evidence indicating that the adjudicating authority or appellate authority had made any efforts whatsoever to verify the Modvat credit account of the appellant before confirming the excise duty demand and imposing the penalty.
8. In view of the above, we allow the stay petition and dispense with the condition of pre-deposit of duty, interest and penalty till the disposal of the appeal. Penalty is also stayed.
9. Appeal be listed in due course.
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