2015 (12) TMI 1598 - AT - Central Excise

Manufacture - various types of scrap/waste of packing material remaining after removal of inputs therefrom and the scrap of grinding sludge and used/mixed oil and effluent water - as all the waste and scrap are excisable, the duty was sought to be demanded on the value of waste other than the scrap of grinding sludge - Held that - the scrap of packing material is nothing but scrap/waste of packing material in which the appellants have received various inputs required for manufacture of final products. These scrap/waste have not been manufactured by the appellant and have not been arisen during the course of manufacturing of their final products. Therefore the said scrap/waste have not passed the test of manufacture. In the circumstances, the duty is not payable as held by the Apex Court in the case of West Coast Industrial Gases Ltd. (supra). As the waste and scrap does not pass the test of manufacture, therefore, no duty is payable by the appellants. Demand - Emergence of scrap of grinding sludge and used/mixed scrap of effluent water - Held that - the entire quantity of duty paid inputs have been used in relation to the manufacture of dutiable final product. For manufacture of required quantity of final product, the appellants used predetermined quantities of the inputs resulting in the emergence of the dutiable final product. Therefore, it is not possible for the appellant to manufacture the desired dutiable final product by using a lesser quantity of the inputs, so as to avoid the generation of the waste. Therefore the entire quantity of the duty paid inputs was used in the manufacture of final products and not in relation to the manufacture of the waste/scrap. Therefore, the emergence cannot be waste part of the goods have been used to manufacture such waste. THE waste is not on account of manufacture, therefore, the appellants are not liable to pay duty. - appeal allowed.

Summary

Issues:
- Demand of duty on various types of scrap/waste of packing material and mix-scrap of grinding sludge, used/mixed oil, and effluent water.
- Applicability of duty on waste and scrap not passing the test of manufacture.
- Liability to pay duty on the emergence of scrap of grinding sludge and used/mixed scrap of effluent water.

Analysis:
1. Demand of Duty on Scrap/Waste of Packing Material:
The appellant was contesting the demand of duty amounting to Rs. 5,53,24,043/- for the period May 2008 to August 2012 on different types of scrap/waste of packing material and mix-scrap of grinding sludge, used/mixed oil, and effluent water. The appellant argued that they are not liable to pay duty on such clearances as the waste and scrap have not passed the test of manufacture. They cited various judicial pronouncements and circulars to support their claim. The tribunal analyzed the nature of the scrap and waste disposed/sold by the appellant and concluded that the scrap of packing material did not pass the test of manufacture, hence no duty was payable by the appellants.

2. Applicability of Duty on Waste and Scrap Not Passing the Test of Manufacture:
The tribunal further examined the issue of liability to pay duty on the emergence of scrap of grinding sludge and used/mixed scrap of effluent water. The appellant argued that the entire quantity of duty paid inputs was used in the manufacture of the dutiable final product and not in relation to the manufacture of the waste/scrap. They relied on specific decisions to support their stance. The tribunal considered the facts and legal precedents cited, including a circular clarifying the excisability of mineral oil sludge, and held that as the waste was not on account of manufacture, the appellants were not liable to pay duty.

3. Liability to Pay Duty on Emergence of Scrap of Grinding Sludge and Used/Mixed Scrap of Effluent Water:
In conclusion, the tribunal set aside the impugned order and allowed the appeals with consequential relief, if any. The judgment highlighted the distinction between waste and dutiable final products, emphasizing that duty is not payable on waste and scrap that do not pass the test of manufacture. The decision was based on a thorough analysis of the facts, legal arguments presented by both parties, and relevant judicial precedents and circulars.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT Chandigarh provides a comprehensive overview of the issues involved, the arguments presented by the parties, and the tribunal's reasoning leading to the final decision in favor of the appellants.