By TIOL News Service

MUMBAI, FEB 13, 2013: AMBIVLI is a small town, around 60 kilometres North-East of Mumbai. It falls under the Kalyan Dombivli Municipal Corporation and is often referred by the name Mohone.

There is no credible information on how Ambivli got its name though there is a myth that it may have got the name from the Amba Goddess. Early settlers and tribals in inhabited pockets of land around Ambivli.

Ambivli came into limelight when a major chemical and rayon manufacturing company called National Rayon Corporation (NRC Ltd) established their headquarters in the year 1946. NRC became synonymous with Ambivli and Mohone.

The company provided living facilities (apartments, hospital, club, school, shopping) to the employees thus forming the NRC Colony. NRC Ltd. went on to become one of the top companies of India in the early 1970s.

But that is history.

Writers like Dipen Ambalia who were born and brought up in NRC colony have fond memories of the place and have vividly captured their early days on their blog.

In the year 2006 the company sold its 400 acre plot at Mohone village for Rs 150 crore and on 17 th November, 2009, there was a lock out in the company. As on date, the unit has been declared sick.

Now, it is only memories that NRCites have and though they are spread all over the world, they are trying to unite through Facebook.

Let aside the historical and emotional part, the Central Excise department viz. CCE, Thane-I had issued a show-cause notice demanding more than Rs.83 lakhs of duty. The reason - the assessee was working under the CENVAT Credit Scheme and during the period 2005 to 2009 the applicants cleared the scrap of capital goods valued at Rs.5,09,85,377/- without payment of duty. On 11 th March, 2010, the adjudicating authority confirmed the demand citing the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004 which provides that if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value.

Aggrieved, the appellant had filed a Stay application before the CESTAT.

The Tribunal vide stay order dated 4/10/2011 directed the applicants to deposit an amount of Rs.20 lakhs against the demand of Rs.83,37,278/- for hearing of the appeal. The applicants challenged the order before the Bombay High Court and the High Court vide its order dated 19/04/2012 set aside the order passed by the Tribunal and directed the Tribunal for fresh consideration in accordance with law.

The matter was heard recently by the CESTAT.

The appellant submitted that in respect of the capital goods which were cleared no credit has been availed as their unit was 50 year old and therefore, the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004 are not applicable. However, this contention was not taken into consideration by the adjudicating authority while confirming the demand. The applicants also pleaded financial hardships on the ground that the unit is declared as sick.

The Revenue representative submitted that the applicants had not produced any evidence in support of their pleading that no credit has been availed on the capital goods which was cleared as scrap and hence the demand is rightly made.

The Bench observed -

"6. We find that as per the provisions of Rule 3(5A) of the CENVAT Credit Rules, 2004, if the capital goods are cleared as waste and scrap, the manufacturer shall pay an amount equal to the duty leviable on transaction value. In the present case, the applicants were working under the CENVAT Credit Scheme and availed credit in respect of inputs as well as capital goods. Scraps of the capital goods were cleared during the period 2005 to 2009. The applicants failed to produce any evidence in support of their claim that no credit has been availed in respect of the capital goods of which scraps were cleared. Therefore, prima facie, no strong case has been made out by the applicants for total waiver of pre-deposit of the dues. However, in the facts and circumstances of the case and also the financial hardships as pleaded, the applicants are directed to deposit Rs.10 lakhs (Rupees ten lakhs) within a period of six weeks. On deposit of the above mentioned amount, pre-deposit of the balance dues is waived and recovery thereof is stayed during the pendency of the appeal."

Bygones:

"3. The department has no case that the impugned goods had arisen in a process of manufacture or mechanical working of metals and metal goods. Therefore, the impugned goods could not be subjected to duty as ‘waste and scrap' under Section XV. The department has also no case that these are capital goods on which MODVAT credit had been availed and removed as such. The lower authorities have proceeded on the basis that the appellants had clandestinely removed the impugned goods and had not established before them that the impugned goods did not attract Central Excise duty. I find that it is the onus of the department to establish that the duty is payable on any item cleared without payment of duty by an assessee. In the instant case, there is only an allegation that the appellants had removed the goods on which duty was payable. The assessee is engaged in the manufacture of cotton yarn and not in the manufacture of metal or metal goods. In the circumstances, I find that the impugned order is not sustainable and the same is set aside. The appeal is allowed.” - Sri Vignesh Yarns Pvt. Ltd. Final Order No. 26/2008, dated 9-1-2008, dated in Appeal No. E/288/2005."