2006 (6) TMI 271 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 57-S of the Central Excise Rules, 1944 regarding the use of moulds as capital goods and payment of duty on waste and scrap.

Analysis:
The appellant obtained moulds under Rule 57-S of the Central Excise Rules, 1944 and claimed credit of duty paid on them as capital goods. The appellant argued that the moulds were used in producing finished goods, and after becoming waste and scrap, some were cleared on payment of duty, while others were melted captively in the production of steel casting. The Department contended that duty should be paid on the captive use of moulds reduced to waste and scrap. The lower authorities referred to Rule 57-S to support the duty demand. However, Rule 57-S(1) allows capital goods to be used in the manufacturer's factory or removed for home consumption on payment of duty or for export.

The rule permits the use of capital goods in the factory without any specific conditions. Therefore, the use of capital goods by the appellant cannot be challenged. Rule 57-S does not mandate duty payment for such use. Consequently, the duty demand on the appellant lacks legal basis. Therefore, the impugned order is set aside, and the appeal is allowed.

This judgment clarifies that Rule 57-S of the Central Excise Rules, 1944 permits the use of capital goods in the manufacturer's factory without imposing any duty payment obligations. The ruling emphasizes that the use of capital goods in the production process, even if resulting in waste and scrap, does not attract additional duty liability under Rule 57-S. The decision underscores the importance of interpreting tax provisions in line with their explicit language and purpose to prevent unjustified duty demands on taxpayers.