2011 (10) TMI 348 - AT - Central Excise

Credit of duty paid on raw materials cleared as Scrap Held that - In the present case Raw material is being tested before the same is accounted for by stores department. Certain material which is contaminated is cleared as scrap. In these circumstances the raw material on which credit has been availed is not used for in or in relation to the manufacture of final excisable goods therefore the assessee is not entitled for credit on such quantity of raw material. Hence order imposing demand alongwith interest is confirmed. - Decided against the assessee. In respect of penalty assessee filed necessary declarations thus no suppression with intent to evade duty can be alleged against the assessee. Thus order whereby the penalty is set aside is upheld. - Decided in favor of assessee.

Summary

Issues:
- Appeal against Order-in-Appeal passed by Commissioner (Appeals)
- Denial of credit for material cleared as scrap
- Imposition of penalty under Rule 57 I of the Central Excise Rules

Analysis:
1. Appeal against Order-in-Appeal passed by Commissioner (Appeals): The case involved appeals by both M/s. Cable Corpn. of India and the Revenue against the Order-in-Appeal passed by the Commissioner (Appeals). The Commissioner upheld the demand but set aside the penalty, stating no intent to evade payment of duty. Both parties filed further appeals, leading to a detailed examination of the facts and legal arguments presented.

2. Denial of credit for material cleared as scrap: The dispute centered around the denial of credit by the Revenue for material cleared as scrap by M/s. Cable Corpn. of India. The Revenue contended that since the raw material was cleared as scrap, the assessees were not entitled to credit. However, the assessees argued that the material was initially intended for use in the manufacture of final products but was found to be contaminated during testing and hence cleared as scrap. The assessees relied on a judgment by the Bombay High Court to support their claim for credit.

3. Imposition of penalty under Rule 57 I of the Central Excise Rules: The Revenue imposed a penalty under Rule 57 I of the Central Excise Rules alongside confirming the demand. However, the Tribunal found that the assessees had provided necessary declarations and informed the Revenue about the clearance of the material as scrap before the actual clearance. This proactive disclosure indicated no intent to evade duty, leading to the Tribunal upholding the decision to set aside the penalty.

In the final judgment, the Tribunal dismissed both appeals, affirming the decision to confirm the demand for credit denial but setting aside the penalty imposed by the Revenue. The judgment highlighted the importance of compliance with procedural requirements and proactive communication with the authorities to avoid allegations of duty evasion.