2013 (9) TMI 277 - AT - Central Excise

Denial of Exemption Notification No. 202/88 and Notification No. l/93 - Assesses were engaged in the manufacture of rerolled products of iron and steel falling under Chapter 72 of the First Schedule to the Central Excise Tariff Act. 1985 - They were using ship breaking material as inputs for manufacturing of their final products, which were exempted under Notification No. 202/88 and Notification No. l/93 - The issue involved in the case was regarding denial of benefit of Notification No. 202/88 on the ground that the scrap which was consumed by the respondent was ship breaking scrap and the said ship breaking scrap during the relevant period was exempted from payment of duty Held that - The raw materials which were inputs arising out of ship breaking material were cleared at the nil rate of duty and hence the benefit of Notification No. 202/88 will not be available - COMMR. OF C. EX., BHAVNAGAR Versus AHMEDABAD ROLLING MILLS PVT. LTD. 2008 (3) TMI 54 - CESTAT, AHMEDABAD and Vinubhai Steel Co. Pvt. Ltd. v. CCE, Bhavnagar 2011 (5) TMI 382 - CESTAT, AHMEDABAD - both the decisions of the Bench will be clearly cover the issue in favour of the Revenue. Assesses would not be eligible for benefit of Notification No. 202/88, the value of their clearances have to be taken into consideration for the purpose of computing aggregate value of the clearances in terms of Notification No. 1/93 - The exemption was available to the goods and material of Chapter 73 obtained by breaking up of ships, boats and other floating structures - There was no condition attached to the availability of the exemption in terms of said notification - the notification was conditional and as such the manufacturer of the raw material might or might not have availed the same, cannot be appreciated - For the purpose of classification, they were falling under different headings and sub-headings - Inasmuch as there being no condition attached to Notification No. 45/93, it had to be held that the material obtained by breaking of ships, boats, or other floating structures was exempted & the manufacturers of the same has availed said exemption.

Summary

Issues:
Appeal against Order-in-Appeal setting aside demands confirmed by adjudicating authority under Notification No. 202/88 and Notification No. 1/93 for the use of ship breaking material as inputs for manufacturing rerolled products of iron and steel.

Analysis:
The appeals were filed by the Revenue challenging the Order-in-Appeal setting aside the demands confirmed by the adjudicating authority. The issue revolved around the use of ship breaking material as inputs for manufacturing rerolled products of iron and steel, falling under Chapter 72 of the Central Excise Tariff Act. The respondents claimed exemption under Notification No. 202/88 and Notification No. 1/93 for a specific period. Show cause notices were issued, denying the exemption under Notification No. 202/88 due to ship breaking materials not being specified, and seeking to enhance the duty rate under Notification No. 1/93. The adjudicating authority confirmed the demands but refrained from imposing penalties. On appeal, the Commissioner (Appeals) set aside the Order-in-Original.

The main contention by the departmental representative was that the benefit of Notification No. 202/88 required duty to have been paid on the inputs used, which was not the case with ship breaking scrap used by the respondents. Reference was made to previous judgments by the Tribunal in similar cases. The counsel for the respondents argued that the inputs purchased from the open market should be considered as duty paid, citing a Supreme Court judgment in a related matter.

The Tribunal analyzed the submissions and records, focusing on the denial of the Notification No. 202/88 benefit due to the use of ship breaking scrap exempted from duty. Referring to a previous case, the Tribunal emphasized that the exemption under Notification No. 44/93 covered materials obtained by breaking up ships, boats, and floating structures without conditions. The Tribunal rejected the argument that the exemption was limited to specific vessels under Chapter 89, holding that all materials from ship breaking were exempted. Since the respondents did not prove duty payment for the materials, the demand was upheld.

Additionally, the Tribunal noted a previous decision where the benefit of Notification No. 202/88 was denied due to the use of ship breaking material. It distinguished the case cited by the respondents, emphasizing the unique circumstances of using ship breaking scrap exempted from duty. Relying on its earlier judgments, the Tribunal set aside the impugned order and allowed the appeals filed by the Revenue.

In conclusion, the Tribunal upheld the demands due to the use of ship breaking scrap exempted from duty, denying the benefit of Notification No. 202/88. The judgments in similar cases and the specific circumstances of using exempted materials were crucial in determining the outcome of the appeals.