2008 (9) TMI 715 - AT - Central Excise

Summary

Issues:
1. Whether waste and scrap arising during the manufacture of power-driven pumps are excisable and subject to duty payment.
2. Applicability of Rule 6(3) of the Cenvat Credit Rules, 2004 to the waste and scrap.
3. Interpretation of case law regarding excisability of waste and scrap.
4. Reversal of Cenvat credit on common inputs used in the manufacture of final products.

Analysis:
1. The issue at hand revolves around the excisability of waste and scrap like metal and plastic scrap arising during the production of power-driven pumps. The appellant argues that since their only final product is the PD Pump, any waste and scrap generated in the manufacturing process should not be excisable. On the contrary, the Revenue contends that the waste and scrap are excisable but exempt from duty payment under a specific notification. The Revenue highlights the lack of separate accounts for inputs used in the production of final products and waste/scrap, leading to the application of Rule 6(3)(b) of the Cenvat Credit Rules, 2004, resulting in the impugned demand.

2. The Tribunal's decision is influenced by a previous ruling in the case of Rallies India Ltd., which discussed the denial of Modvat credit for iron and steel scrap despite being excisable products. The appellant relies on various legal precedents, including decisions by the Apex Court and the Tribunal, to argue that waste and scrap should not be considered excisable irrespective of their mention in the Tariff. The appellant contests the applicability of the observations made in the Rallies India case, asserting that waste and scrap emerging during the manufacturing process of PD Pumps should not be treated as excisable final products. The Tribunal leans towards the appellant's argument, supported by the preponderance of case law suggesting that the waste and scrap in question should be deemed non-excisable, rendering the impugned demand unsustainable.

3. The Tribunal also addresses the issue of reversing Cenvat credit on common inputs used in the production process. The Revenue's argument hinges on the appellant's failure to reverse the credit taken on common inputs for both final products and waste/scrap. However, the Tribunal distinguishes this case from a previous ruling involving by-products, emphasizing that the current scenario deals specifically with waste and scrap. The Tribunal finds that the case law cited by the Revenue is not directly applicable to the facts of the present case, further reinforcing the appellant's stance on the non-excisability of the waste and scrap generated during the production of PD Pumps.

In conclusion, the Tribunal grants a waiver of pre-deposit and a stay of recovery concerning the adjudged dues, considering the arguments presented by both parties and the interpretation of relevant legal provisions and case law.