2010 (12) TMI 469 - AT - Central Excise

Waste and scrap - Excisability - The assessee being a manufacturer of cement having various structural portions which use to get damaged either due to prolonged use or due to excessive heat and evaporation and, therefore, it was becoming necessary to replace deteriorated or damaged parts/structures periodically - Held that by using the raw material, being plates, sheets, welding electrodes channels, beams, angles etc. and by using such raw material, and subjecting it to manufacturing process, by giving welding, bending or finishing etc. a part required to be replaced comes into existence being which is obviously a spare part of the plant and machinery, a distinct commodity, and is placed in the plant and machinery, as a spare part, or as a replaceable part, it was held that in such circumstances in the process of manufacturing of such part, metal waste or scrap comes into existence, there can be no escape from the conclusion that metal waste or scrap has come into existence as a result of manufacturing process within the meaning of Section 2(f) of the said Act. - Demand of duty and penalty confirmed.

Issues:
1. Reduction of penalty while confirming demand of duty on waste and scrap.
2. Whether the waste and scrap generated by the appellants attract duty liability.
3. Applicability of Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985.
4. Comparison with previous judgments and their impact on the current case.
5. Justification for imposing penalty based on suppression of relevant facts.

Issue 1: Reduction of penalty while confirming demand of duty on waste and scrap

The appeals arose from a common order passed by the Commissioner (Appeals) Jaipur, confirming the demand of duty on waste and scrap while reducing the penalty imposed by the adjudicating authorities. The penalties were reduced while the duty demands of Rs. 1,89,802/- and Rs. 1,82,928/- were confirmed. The proceedings were initiated based on show cause notices dated 27-8-2002 and 6-6-2003. The Commissioner (Appeals) upheld the demand of duty on waste and scrap but reduced the penalties imposed.

Issue 2: Liability of duty on waste and scrap generated by the appellants

The appellants, engaged in the manufacture of clinker and cement, were alleged to have cleared M.S. Scrap without payment of duty and issuing central excise invoices. The waste and scrap were generated from cutting of M.S. angles, channels, sheets, plates, etc. The appellants argued that the waste and scrap did not result from the manufacture of excisable goods and, therefore, no duty was leviable. They contended that the waste and scrap were generated during repairs and maintenance activities and were not classifiable under any chapter heading for duty imposition.

Issue 3: Applicability of Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985

The authorities relied on Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985, stating that the waste and scrap generated by the appellants fell under the expression "mechanical working of metal." The waste and scrap were considered to be generated during the repair and maintenance of plant machinery, thus attracting duty liability. The authorities rejected the appellants' argument that no duty was imposable on the waste and scrap.

Issue 4: Comparison with previous judgments and their impact

The appellants cited a Tribunal decision in the case of Prism Cement Ltd. v. CCE, Bhopal, where it was held that no duty was imposable on scrap and waste not generated from a manufacturing process. However, the Department argued that the decision in Prism Cement case was based on the lack of challenge to the earlier decision and did not apply to the current case. Additionally, the Department referred to a Rajasthan High Court decision in Union of India v. Grasim Industries Ltd., which supported the imposition of duty on scrap generated during repairs and maintenance activities.

Issue 5: Justification for imposing penalty based on suppression of relevant facts

The Department justified the imposition of penalties by stating that the appellants had suppressed relevant facts from the Department. The Tribunal found that the appellants' suppression of facts warranted the imposition of penalties. The decision highlighted the importance of disclosing all relevant information to the Department to avoid penalties.

In conclusion, the Tribunal dismissed the appeals, upholding the demand of duty on waste and scrap while reducing the penalties imposed. The decision was based on the interpretation of relevant legal provisions, comparison with previous judgments, and the justification for penalty imposition due to the suppression of facts.

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