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1 1 ctimieig, 3947, 4 3FI14el,1153U- II, NPRI-414- I. *often, au- lsrretrcitstaa., 41Th?.14.1m *rim, aitararit3i6jicogi OFFICE OF THE ASSISTANT COMMISSIONER, CENTRAL EXCISE, DIVISION - II, AHMEDABAD- I. THIRD FLOOR, CENTRAL EXCISE BHAVAN, NEAR POLYTECHNIC, AMBAWADI, AHMEDABAD W.#.1V/1(b)53/Audit-Rohan/ a3t rata / Date of Order: tialiolf dinf / Date of Issue : aitr Mita/Passed by : Ms.Ruchi Bisht / Assistant Commissioner 31Talf F. / Order-in-Original No AC /10 /Div-II/ zrr vira. 31 At.31 t, 5+1 /.3 1 1W-a sie Vgym Rua. t I This copy is granted free of charge for private use of the person(s) to whom it is sent. 31Ta3T # 3T-4cZ al) afithd 3Trar tig 3fElfg, $tic wsi # 60(40) grit W 3t4731g147 (314), awa14 5c414 am-a , 3TEMT-41a LIMIT A. 4.V.1 glilia" TT +midi t I 0 314TF IT{ 2/-(ef.0-04) 410-4i4idef MITZ1FT Tat! I Any person deeming himself aggrieved by this order may appeal against this order in Form E.A.1 to Commissioner (Appeals), Central Excise, Central Excise Bhavan, Ambawadi, Ahmedabad within sixty days from the date of its communication. The appeal should bear a court fee stamp of Rs.2/- only. 3-47r 3itg, 31411R471 45INI srrfcr i. P.1 4`cliif atcitafi t aif.1lvrite - 3-fr trr a,44 ss (3111F), 4J-lia 4r, 2001?ARTA 3 i SIT0tila 39-41R" TaTaTi Feir 70 4 I 0414P-Tirratfd4i-dia.?! +id d itkr The Appeal should be filed in Form No. E.A.1 in duplicate. It should be signed by the appellant in accordance with the provisions of Rule 3 of Central Excise (Appeals) Rules, It should be accompanied with the following :- 3?13141F 1 qj Copy of accompanied Appeal. (H) Javier i'rcfree3ttrar 1-4:orrair ra44 3rEftat t, ltwg LW 17375M CfiZ1, ZIT 3TRI3frailt fzmc W4T101:4Qu. I 2/ midef 1.ff Copies of the decision or, one of which at least shall be certified copy, the order appealed against or the other order which must bear a court fee stamp of Rs.2.00/-. Sub: Show Cause Notice NolV/1(b)53/Audit-Rohan/13-14 dated issued against M/s. Rohan Dyed & Intermediates Ltd, Plot No , GIDC, Phase-I, Vatva, Ahmedabad in the case of non payment of excise duty on the clearance of waste & Scrap matter reg.

2 2 Brief Facts of the case 1. M/s. Rohan Dyes & Intermediates Ltd Plot No.115 to 117/123, Phase-I, GIDC, Vatva, Ahmedabad (herein after referred to as the assessee) are engaged in the manufacture of Synthetic Organic Dyes falling under Chapter 3204 of the First Schedule to the Central Excise Tariff Act, 1985 and having Central Excise Registration No.AAACR1848NXM001. The said assessee is also availing the benefit of Cenvat Credit Scheme as envisaged in the Cenvat Credit Rules, During the course of internal audit conducted for the period from December-2012 to October-2013, from the ledger of Scrap sales it is observed that the assessee has cleared scrap during the year and (up to October 2013), without any prescribed document and without payment of Central Excise duty. It appears that the assessee have cleared the scrap, without any proof. Further, they have also admitted clearance of iron scrap generated due to corrosion and rusting, which are in any case excisable goods. 3. Further, it also appears that the assessee has availed CENVAT credit of capital goods on number of items brought by them and utilized in the plant, thus, the assessee is liable to pay Central Excise duty on scrap cleared by them under section 4 of Central Excise Act, 1944 read with rule 4 of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, The assessee has availed and utilised CENVAT Credit on Capital goods and the scrap generated of these Capital goods at their manufacturing premises which was cleared by the assessee without payment of Central Excise duty. The detail of clearance value of scrap and liable to pay Central Awe uuty n cn utosci Month. Value in Rs. BED EC SHEC Total April May June December January February March Total April May June August September October Total G.T Further it is observed that the assessee had cleared M.S. Scrap without payment of duty. The M.S. Scrap is generated out of the capital goods in the factory of the assessee. The assessee is availing cenvat credit on capital goods under Cenvat Credit Rules, As per Rule 3(5A) of the Cenvat Credit Rules, 2004, if the capital goods on which cenvat credit is taken are cleared as waste and scrap, the manufacturer has to pay an amount equal to the duty leviable on transaction value. Therefore the assessee is required to pay duty on the clearance of M.S. Scrap which is generated out of the capital goods on which cenvat credit was availed. The assessee could not produce any document before the officers of audit in support of their contention that the M.S. Scrap was generated out of items on which they had not taken any cenvat credit. Therefore, it appeared that the assessee has contravened the provisions of Rule 6 of the Cenvat Credit Rules and Rule 3(5A) of the Cenvat Credit Rules, 2004 in as much as they failed to pay duty on the scrap generated from the capital goods cleared as scrap.

3 3 5. Therefore, further inquiry was caused and a statement of Shri Ishwarsingh Anarsingh Paidyar was recorded on under section 14 of the Central Excise Act, 1944 wherein on asking that they have cleared scrap during the year and (up to August 2013), without any prescribed document and without payment of Central Excise duty as they have availed and utilized Cenvat Credit on capital goods from which scrap is generated, they are liable to pay Central Excise duty on scrap cleared by them. He replied that they have cleared waste & scraps and not paid central excise duty, no Cenvat credit was taken on angle, channel, plates, garder, beam etc. which are used as various places in the factory. Further, it also appears that the assessee has also contravened the provision of Rule 3(5A) of the Cenvat Credit Rules, 2004 as they failed to pay the amount equal to the duty on the capital goods cleared as scrap. The said duty along with interest shall be recovered from the manufacturer by invoking the provision of extended period of five years contained in Section 11A (5) of the Central Excise Act, 1944 (erstwhile section 11A (1) of the Central Excise Act, 1944). Therefore, the assesee has rendered themselves liable for penalty in terms of Rule 15(2) of the Cenvat Credit Rules, 2004(applicable during relevant period i.e onwards readwith Section 11AC(b) of CEA Therefore, M/s. Rohan Dyes & Intermediates Ltd, Plot No. 115 to 117 & 123 I GIDC, Vatva, Ahmedabad are hereby called upon to Show Cause to the Assistant Commissioner of Central Excise, Division II, Ahmedabad-I, having her office situated at 3rd Floor, Central Excise Bhavan, Opp. Polytechnic, Near Panjrapole, Ambawadi, Ahmedabad , as to why:- (i) Central Excise duty to the tune of Rs. 2,31618/- (Inclusive of Education Cess and Higher Education Cess) for clearance of scrap without cover of proper Central Excise documents and nonpayment of Central Excise duty on scrap cleared by them as required under Rule 3(5A) of the Cenvat Credit Rules, 2004 read with Sections 11A(5) of Central Excise Act, (ii) penalty should not be imposed under Section 11AC(1) (b) of Central Excise Act (Hi) Interest should not be charged & recovered Section 11AA of Central Excise Act, DEFENCE REPLY 7. The said assesee has submitted the reply of the Show Cause Notice on wherein they have submitted the brief facts of the case. They stated that at the very outset they deny all the allegation, averments and contentions raised in the subject. They further submitted that 1) Show Cause notice is based on the Internal audit conducted for the period from December 2013 to October for the purposes of the sale of MS scrap generated due to corroded rust and dust of old materials and machineries cleared by them without payment of any duty, firstly kindly note that the very same issue was equally raised during the earlier audit period of for the period involving years 2008 to 2010 vide (LAR no 105/ dtd ). The department had duly dropped the entire query and demand on this very issue considering their reply that such waste and scrap was not of any capital goods at all. The said waste and scrap was generated from the corrosion of old repair items of Iron and steel like Angles channels, girders plates etc which were only used for repairing of machineries and further scrap of packing materials like drums, bags, liners etc of inputs. So such scrap was never of any Capital goods at all and the same was only generated automatically without any process out of such materials only. Therefore there was never even any credit availed on such items like angles channels girders and plates etc which were only used as repair material nor availed on our packing materials of our inputs. There was no duty liability on such sale of such waster and scrap automatically generated in their factory due to wear and tear only.

4 4 2) They further drawn attention that the Honble Supreme Court in the case of 2003 (155) ELT 11(SC) in the case of CCE V/s West coast industrial Gases Ltd has already settled this issue by holding that such waste and scrap is not dutiable and based upon the same the CBEC has also accepted this position vide circular no 721/37/2003-CX dtd Such view and decision is thereafter taken in several tribunal orders till date. Therefore it is absolutely clear and settled legal position that such sale of waste and scrap generated at their end is not dutiable and therefore demand of Rs. 2,31,612/- as raised in the present SCN is not correct and is also time barred since this audit was already done on and the SCN was issued on for the period involving demand of April 2012 to October 2013 most of which is admittedly time barred. Further they had also clearly pointed out this legal position during the reply to the audit objection by the Range Superintendent in reply dtd and statement dtd that they had cleared such waste and scrap and not paid duty since the same wsa not dutiable as the same was not upon dismantling of any of our capital goods at all. Such scrap is of rusted iron and or packing materials only upon which no Cenvat credit was ever availed and therefore such waste and scrap not being dutiable the demand does not survive.. PERSONAL HEARING: 8. Personal hearing was fixed on but the said assesse vide letter dated submitted that P H couldn't be attended by their Advocate as he was out of station. Personal Hearing was re-scheduled on , and Shri Ishwar Singh A Padiyar, Authorized signatory, appeared for personal hearing on He reiterated his written submission and also requested for 10 days time for further submission. On dated , they has submitted further submission and furnished documents of sales scrap details invoice-wise and also submitted the Certificate dated issued by Chartered Accountant, stating they have not taken Cenvat Credit of items from which scrap was generated and Capital Goods have not been removed and dismantled during DISCUSSION AND FINDINGS: 9. I have carefully gone through the case records as well as the written and oral submissions made by the assessee in their defense. From the case records, I find that the point raised by the Audit and the issue in hand is to decide whether the said assesee is required to pay duty amounting to Rs 2,31,618/-on the clearance of scrap without cover of proper documents and non payment of duty. 10. I observe that the said assessee vide letter dated has submitted documents of sales scrap invoice wise detail of clearance of such scrap and copy of Invoice from to On going through of the same, I have seen that such scrap was cleared on commercial invoice. Further, I observe that on the said invoices description of the goods is also mentioned. It may also be mentioned that all invoices have remarks stating the details of type of clearances i.e waste of iron on which no Cenvat Credit was taken ( Scrap of

5 5 Angle/Channel/Plats/Grinder) or waste scrap of Packing material of inputs. The said assesee has also submitted the sales ledger of Scrap during the period from April 2012 to Aug-2013, which shows that the said assesee has sold the scrap during of Rs 11,82,774/- and Rs 6,91,162/- during (till Aug -2013) and it is also mentioned that the waste and scrap of iron on which no cenvat credit was availed or waste scrap of packing material. Further, the said assesee has also submitted the Certificate dated issued by the Chartered Accountants stating that they sold the scrap of HDP Bags, Liners, Drums and scrap of mix Iron i.e. Angle, Channel, Plate, girder etc. amounting to Rs 11,82,774/- and Rs 6,91,162/- during F Y & respectively. It is also certified that company has not taken cenvat credit on purchase of items from which this scrap is generated and sold. Further, Capital goods have not been removed and dismantled during FY On examination of the record submitted by the said assessee, I find that in this case, there are two types of scrap (i) scrap generated due to corroded rust and dust of old material and machinaries and repair item of iron and steel like Angles, Channels, Grinders, Plates and (ii) scrap of packing material like drum, bags, liners etc of input. 12. As per Cenvat Credit Rule 3(5A) of Cenvat Credit Rules, 2002 If the capital goods on which credit has been availed are cleared as waste and scrap, the manufacture shall pay an amount equal to the duty leviable on transaction value. As per record submitted by the assesee and on examination of same, I find that the said assessee cleared the waste and scrap of generated from Angles, Channels, Girders, Plates and they have never availed any credit on such items. Therefore, they are not required to pay central excise on the same. 13 Secondly, they has cleared the scrap of packing material like drum, bags, liners etc of input As per board's Circular no 721/37/2003-CX dated , "it is clarified that no duty shall be payable and no reversal of credit is also warranted on waste Package/containers used for packing inputs, on which credit has been taken, when cleared from the factory of the manufacturer availing Modvat/CENVAT credit" 14. Further, I find that Hon'ble Supreme Court in case of Commissioner of Central Excise Vs. West Coast Industrial Gases Ltd (2003(155)ELT11(SC)), it is held that waste- Drums/barrels in which input is received by the manufacturer could not be treated to be a waste airing out of processing of the inputs for which credit has been taken- No duty leviable on such drums/barrels/containers cleared from the factory. The Hon'ble S C has also taken the same view in the case of Commissioner v/s Tata Iron & Steel Co Ltd 92003(151)ELT A292). In the case of Commissioner V/s Wipro Ltd, { 2003(1540 ELT A175(SC)} Hon'ble Supreme court held that Packing material i.e cartons, boxes, drums, and other packing material after use are not excisable as waste and Scrap. The ratio of the above cases is also applicable in the said case.

6 6 The Hon'ble Tribunal in the case of Alembic Ltd Vs CCE, Vadodara (2007(218)ELT (Tri-Ahmd) has also held that Scrap of Packing Material and Old and used capital goods cannot be considered as scrap airing out of the manufacture and not liable to excise duty. Moreover it is further held by Tribunal in the case of Shriram Alkali & Chemicals V/s CCE, Surat 2010(259)ELT 77 (Tri-Ahmd) that Central Excise Tariff states waste and scrap to cover goods not usable because of wear and tear or other reasons and substantial portion of the capital goods which have been sold as waste and scrap, were the ones on which credit has not been taken, hence such waste and scrap is not excisable. 16. Thus, in light of my findings supported by judicial prouncements as discussed in foregoing paras, I hold that the said assesee has cleared the waste of packing material of inputs and waste and scrap of Iron on which no credit has been availed. Therefore, the said assesee is not liable to pay excise duty on the same. 17. In view of the above findings, I pass the following orders in the matter. ORDER I drop the demand of Rs 2,31,618/- initiated against M/s Rohan Dyes & Intermediates Ltd, Plot No 115 to 117, Phase- I, GIDC, Vatva Ahmedabad vide the mentioned Show Cause Notice. 18. The Show Cause Notice issued to M/s. Rohan Dyes & Intermediates Ltd, Plot No 115 to 117, Phase- I, GIDC, Vatva Ahmedabad, vide F.No. IV/1(b)53/Audit-Rohan/ dated stands disposed of in the above manner. F.No.: IV/1(b)53/Audit-Rohan/ To, M/s. Rohan Dyed & Intermediates Ltd Plot No , Phase-I GIDC, Vatva, Ahmedabad. Copy to-(1) The Commissioner, Central Excise, Ahmedabad-1 (through DC, By Registered Post k D. RR N, Central Excise, Ahmedabad rthe Superintendent (Systems), Central Excise, Ahmedabad-1 (3) The Superintendent, AR-Ill, Div-II, Central Excise, Ahmedabad-I. (4) Guard file. (Ruchi Bisht) Assistant Commissioner, Central Excise, Division-II, Ahmedabad-I Date:

OFFICE OF THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE, DIVISION-III,AHMEDABAD-I, FLOOR, CENTRAL EXCISE BHAVAN, OPP. GOVT.

d OFFICE OF THE ASSISTANT COMMISSIONER OF CENTRAL EXCISE, DIVISION-III,AHMEDABAD-I, FLOOR, CENTRAL EXCISE BHAVAN, OPP. GOVT. POLYTECHNIC COLLEGE, AMBAWADI, AHMEDABAD - 380015. trram g-1- MT/By R.P.A.D.