2004 (11) TMI 367 - AT - Central Excise

Summary

Issues:

1. Whether the appellants are entitled to avail Cenvat credit on input contained in 'Hard Waste' cleared without payment of duty.
2. Whether 'Hard Waste' can be considered a final product for the purpose of imposing duty and penalty.

Analysis:

1. The appellants, manufacturers of "Cotton Viscose Blended Yarn," faced a demand for Cenvat credit taken on "Viscose Staple Fibre" contained in the 'Hard Waste' cleared without duty payment. The Department treated the 'Hard Waste' as a non-dutiable final product, disallowing the Cenvat credit. A show-cause notice was issued, demanding an amount and proposing a penalty. The original authority confirmed the duty demand and imposed a penalty, which was upheld by the first appellate authority, leading to the current appeal.

2. The consultant for the appellants argued that a similar demand for 'Hard Waste' in a prior period was dropped by the original authority, following a Tribunal decision in another case. The Tribunal's decision in Darshan Agroils Ltd. v. CCE, Lucknow, held that 'Waste and Scrap' were not to be treated as final products. This decision was followed in the present case, where the 'Hard Waste' cannot be considered a final product for Cenvat Credit Rules. As the 'Hard Waste' was cleared without duty payment and cannot be treated as a final product, the demand for duty and penalty was deemed incorrect, leading to the setting aside of the impugned order and allowing the appeal.