2002 (12) TMI 447 - AT - Central Excise

Dutiability of container of inputs - Cenvat/Modvat - Departmental clarifications - Precedent

Summary

Issues:
Manufacture of final products using duty paid goods, clearance of empty barrels and packing cases without duty payment, classification of items as scrap, legality of duty demand, applicability of circulars and instructions, classification of goods under Central Excise Tariff Act, recovery of duty on non-excisable items.

Manufacture of Final Products Using Duty Paid Goods:
The appellants, manufacturers of Tyres, Tubes, and Flaps, availed credit of duty paid goods for manufacturing final products. However, they cleared empty barrels and packing cases without paying duty on such removals. A show cause notice was issued demanding duty payment of Rs. 1,84,170 for the period from February 1998 to July 1998, alleging that the items should be treated as scrap generated in the process.

Legality of Duty Demand and Circulars Applicability:
The Order-in-Original by the Assistant Commissioner of Central Excise was upheld, citing instructions from the Department and the Board clarifying that duty need not be paid on empty containers. The Board's withdrawal of a previous letter was deemed prospective, not retrospective, affecting demands made before the withdrawal. The Department's appeal in the Supreme Court did not grant a stay, and any decision would apply prospectively, not affecting the present case.

Classification of Goods Under Central Excise Tariff Act:
The judgment highlighted that used goods like barrels and plywood boxes, being old and used, cannot be classified as manufactured goods under the Tariff Act unless specified. The lower authorities failed to classify the subject as scrap under the Tariff Act, leading to an improper attempt to recover duty on non-excisable items. The goods removed should be classified under the Tariff based on their form at removal, not merely as containers emptied of contents.

Decision:
The judgment set aside the lower authorities' order and allowed the appeal, emphasizing the correct classification of goods under the Tariff Act and the binding nature of circulars on the Department. It concluded that the demand for duty on the removed items was not justified, considering the legal provisions and circular instructions in force.