2002 (6) TMI 218 - AT - Central Excise

Summary

Issues involved: Whether worn out and damaged goods/waste are excisable goods and whether they are chargeable to excise duty.

The judgment by the Appellate Tribunal CEGAT, Bangalore dealt with the issue of whether worn out and damaged goods/waste are excisable goods chargeable to excise duty. The appellant argued that no manufacturing process occurred as the damaged parts were removed from a plant, and thus, excisability does not apply. The Department contended that the damaged scrap falls into two categories: worn out and damaged parts condemned as scrap, and equipment destroyed in a fire accident. The Commissioner based the duty demand on the statement of the Manager, detailing the nature of the scrap in various sale lots. The appellant cited precedents to support their argument, emphasizing that the removal of damaged parts does not constitute manufacturing. The Tribunal analyzed previous decisions and concluded that the cutting was necessary to remove the damaged goods, not for manufacturing new items. Therefore, the Tribunal accepted the party's contention on excisability, allowing the appeal with any consequential relief.

In the case of Diesel Component Works v. CCE, Chandigarh, the Tribunal differentiated between scrap generated during manufacturing and dismantling of old machinery, stating that only the former is liable to duty. The Commissioner erred in relying on a decision related to waste from ship breaking to support the duty demand on dismantled locomotives. The Tribunal directed the assessment of waste generated during manufacturing for duty imposition. Similarly, in ACC Limited v. CCE, Bhopal, the Tribunal ruled that scrap arising from dismantling condemned machinery is not excisable goods as dismantling does not create new goods. The duty demand on such scrap was deemed legally untenable. These precedents were cited to support the appellant's argument against excise duty on worn out and damaged waste in the present case.

The Commissioner categorized the scrap into worn out and damaged parts condemned as scrap and equipment destroyed in a fire accident, emphasizing that cutting the items into pieces constitutes manufacture. However, the Tribunal found that the cutting was necessary for removing the damaged parts, not for manufacturing new goods. The Department did not claim that the parts were cut into specific measurements post-removal. Therefore, the Tribunal concluded that the precedents cited by the appellant were applicable, supporting the party's stance on excisability. Consequently, the appeal was allowed with any consequential relief.