2006 (7) TMI 531 - AT - Central Excise

Summary

Issues Involved:
1. Classification of used/broken/scrapped cast iron/steel rolls.
2. Applicability of Rule 57-S(2)(b) vs. Rule 57-S(2)(c) for duty calculation.
3. Requirement of documentary evidence for the period/duration of use of the rolls.
4. Allegations of improper Modvat credit utilization.
5. Difference of opinion among the tribunal members regarding the remand or allowance of the appeal.

Issue-Wise Detailed Analysis:

1. Classification of Used/Broken/Scrapped Cast Iron/Steel Rolls:
The appellants, engaged in manufacturing iron and steel products, classified used/broken/scrapped steel rolls as waste and scrap under Heading 8455.90 and paid duty at 15% ad valorem. The Assistant Commissioner did not accept this classification and directed the appellant to pay duty under Rule 57-S(2)(b). The appellant neither challenged nor obeyed this modification and cleared the rolls as waste and scrap.

2. Applicability of Rule 57-S(2)(b) vs. Rule 57-S(2)(c) for Duty Calculation:
The core issue was whether the capital goods should be cleared under Rule 57-S(2)(b) or Rule 57-S(2)(c). Rule 57-S(2)(b) requires duty calculation by allowing a deduction of 2.5% of credit taken for each quarter of use. Rule 57-S(2)(c) applies if the goods are sold as waste and scrap, requiring duty to be assessed as such. The adjudicating authority concluded against the appellant, stating they failed to produce evidence of the duration of use before sale/removal as waste and scrap.

3. Requirement of Documentary Evidence for the Period/Duration of Use of the Rolls:
The adjudicating authority observed that the appellant did not submit supporting documentary evidence regarding the period of use of the rolls. The appellant conceded that while an elaborate system for declaring goods as waste and scrap existed, such evidence was not submitted during adjudication. The tribunal emphasized the importance of proving that the rolls were sold as waste and scrap, not as second-hand goods, which could be substantiated through documentary records or from the buyers.

4. Allegations of Improper Modvat Credit Utilization:
The show cause notices alleged that the rolls should have been cleared under Rule 57-S(2)(b) and raised differential demands totaling Rs. 7,88,56,590.23. The Commissioner confirmed these demands and imposed a personal penalty of Rs. 10,00,000/- on the appellant. However, one tribunal member argued that the revenue did not provide specific records or evidence of Modvat credit taken on these rolls, making the demand baseless.

5. Difference of Opinion Among the Tribunal Members Regarding the Remand or Allowance of the Appeal:
There was a difference of opinion among the tribunal members. One member (Judicial) proposed remanding the case to allow the appellant to submit evidence and substantiate their claims. Another member (Technical) argued that the revenue's case lacked evidence and the appeal should be allowed without remand. The Vice-President agreed with the remand, emphasizing the need to verify whether credit was taken and whether the rolls were cleared as waste and scrap or second-hand goods.

Final Order:
In view of the majority order, the impugned order was set aside, and the matter was remanded for a de novo decision, allowing the appellant to establish their stand with appropriate evidence.