2008 (5) TMI 494 - AT - Central Excise

Summary

Issues:
The issues involved in the judgment are the demand of duty on 'waste and scrap' cleared by the respondents, whether the scrap arose from a manufacturing process, and the liability to pay duty on scrap of capital goods.

Demand of Duty on Scrap:
The Commissioner (Appeals) vacated the demand of duty on 'waste and scrap' cleared by the respondents during specific periods. The impugned scrap did not arise from any manufacturing process. The appeals filed by the Revenue contended that the scrap cleared was manufactured by scrapping capital goods. It was argued that part of the scrap had arisen from repair activities in the workshop of the assessee.

Manufacturing Process and Duty Demand:
The Ld. SDR argued that some of the scrap had arisen from working of metals in the process of machining bought out iron and steel products. It was contended that part of the goods cleared had arisen in the manufacturing process, justifying the duty demand. The definition of scrap appearing in the tariff was cited in support of this claim.

Assessee's Position and Liability:
The Ld. Consultant for the respondents stated that the assessee was engaged in the manufacture of sugar and not in manufacturing capital goods. They clarified that during the material period, they had cleared worn out capital goods that were scrapped, along with scrap from repair activities. It was emphasized that none of these goods could be described as manufactured products incurring duty liability.

Judicial Analysis and Dismissal of Appeals:
Upon careful consideration of facts and submissions, it was observed that the cleared goods were scrap of worn out capital goods. The requirement to pay duty on scrap of credit availed capital goods when sold was enacted after the material period. The definition of waste and scrap from the Central Excise Tariff Act did not support the Revenue's case. It was concluded that the impugned goods did not arise from a manufacturing process or mechanical working of metals. The reliance on Chapter Note 8(a) by the Revenue was deemed misplaced, leading to the dismissal of both appeals filed by the Revenue.

Conclusion:
Both appeals filed by the Revenue were dismissed as lacking merit, based on the absence of evidence supporting the contention that the cleared scrap arose from a manufacturing process or mechanical working of metals, as required for duty liability.