2003 (10) TMI 530 - AT - Central Excise

Summary

Issues:
Manufacture of aluminium cans involving scrap disposal and duty payment under Rule 57F(2) and 57F(5).

Analysis:
The case involved the manufacturing of aluminium cans where waste and scrap of aluminium emerged during the process, which was sent to job workers for recycling as per Rule 57F(2). The resultant product, aluminium sheets, was then used in the manufacture of cans cleared on duty payment. A demand notice was issued objecting to the movement under Rule 57F(2, stating it should be suspended. The objection was based on the contention that while inputs could be sent for job work, scrap arising during final product manufacture could not. The department allowed the removal of aluminium sheets but objected to the scrap removal without duty payment.

The appellant argued that even if duty was paid on the scrap removal, they should receive Modvat credit since there was no diversion of scrap. The lower authorities held that Rule 57F(2) only allowed removal of inputs or partially processed inputs, while a separate Rule 57F(5) existed for scrap removal, requiring duty payment. The demand was confirmed by the Commissioner (Appeals) based on these findings.

During the hearing, the appellants cited Board's Circular No. 15/89, which permitted sending scrap to job workers under Rule 57F(2). It was clarified that aluminium scrap could be dispatched under either Rule 57F(2) or 57F(5, with the manufacturer having the option to choose. The judgment concluded that there was no basis for demanding duty on the aluminium scrap dispatch during the period in question. The appeal was allowed, and the impugned order was set aside, ruling in favor of the appellants.