2004 (12) TMI 463 - AT - Central Excise

Summary

Issues:
1. Duty liability on waste and scrap of capital goods and inputs.

Analysis:
The appeal filed by Revenue questioned whether M/s. Bhilwara Spinners Ltd. should bear duty liability when clearing waste and scrap of capital goods and inputs. The Departmental Representative argued that duty should be paid on waste arising from processing of inputs and on capital goods sold as scrap as per Rule 57F(18) and Rule 57S(2)(c) of the Central Excise Rules, 1944, considering the transformation of waste and scrap into distinct commodities through wear and tear and dismantling. On the contrary, the Advocate for the respondents contended that duty was not applicable to waste and scrap of very old capital goods for which no Modvat credit was taken, especially on paper scrap and HDPE scrap received as packaging material. The Advocate cited precedents like the Supreme Court's decision in CCE v. West Coast Industrial Gases and the case of CCE, Jaipur v. Birla Corpn. Ltd., to support this argument.

The Tribunal carefully examined both parties' submissions. It noted that the Revenue failed to provide evidence refuting the respondents' claim that paper scrap and HDPE scrap originated from packaging material, aligning with the Supreme Court's ruling in West Coast Industrial Gases Ltd. The Tribunal also highlighted that if Modvat credit was not utilized for the scrapped capital goods acquired before the applicability of the Modvat credit scheme in 1994, Rule 57S(2)(c) did not apply. This interpretation was consistent with a previous decision involving M/s. Birla Corpn. Ltd. The Tribunal distinguished the Parle Biscuits case cited by the Departmental Representative, emphasizing that it concerned waste arising during manufacturing where Modvat credit was claimed, unlike the present scenario where Modvat credit was not utilized for the capital goods sold as scrap. Consequently, the Tribunal rejected the Revenue's appeal, affirming that duty liability did not extend to the waste and scrap in question.

In conclusion, the judgment clarified the duty liability concerning waste and scrap of capital goods and inputs, emphasizing the importance of Modvat credit utilization and the origin of the waste material in determining duty obligations. The Tribunal's decision was based on legal interpretations, precedents, and the specific circumstances of the case, ultimately leading to the rejection of the Revenue's appeal.