2007 (3) TMI 53 - AT - Customs

Demand department contended that waste and rejects cleared in the domestic market excise duty is payable as finished product and in addition custom duty and excise duty on inputs alongwith duty and penalty Held duty and penalty not sustainable

Summary

Issues: Appeal against order of the Commissioner regarding excise duty on waste and rejects, duty on inputs used in manufacturing waste and rejects, and penalty imposition.

Analysis:
1. The appellant, M/s. Mahalaxmi Exports, imported duty-free raw materials and procured duty-free materials from domestic sources, bonded in a warehouse under Section 59 of the Customs Act, and used for manufacturing goods.
2. Instead of physically exporting the goods, the appellant cleared them on a deemed export basis in the domestic market, including waste and rejects arising during manufacturing.
3. The Commissioner confirmed excise duty on waste and rejects as finished products, imposing a penalty. However, the demand for duty on raw materials beyond the final products was not sustained due to the absence of removal of duty-free inputs.
4. The department appealed against the non-demand of customs duty on raw materials in waste and rejects, excise duty on such raw materials, and the non-imposition of penalty under Section 72 of the Customs Act.
5. The Tribunal upheld the Commissioner's decision on confirming duty on finished goods, citing a precedent. Regarding duty on inputs used in waste and rejects, the Tribunal found no violation of Section 72 as the raw materials were used for manufacturing under proper permissions.
6. The Tribunal dismissed both appeals, stating that no valid grounds were presented to interfere with the Commissioner's findings on the non-demand of duty on raw materials and the absence of penal action.

This judgment clarifies the liability for excise duty on waste and rejects as finished products, the duty on inputs used in manufacturing waste and rejects, and the imposition of penalties under relevant provisions of the Customs Act. The Tribunal's analysis focused on the proper utilization of duty-free raw materials and the absence of unauthorized removal or diversion, leading to the dismissal of both appeals.