2014 (3) TMI 196 - AT - Central Excise

Demand of duty on scrap - scrap arising in the course of cutting the new plates, pipes etc. for being replaced in the place of corroded portion of the plant, pipe, vessel - Held that - old waste and scrap generated through breaking of the capital goods or crushing or hammer of the same does not result in emergence of any excisable goods. In the case of Tudor India Ltd. referred 2011 (7) TMI 546 - CESTAT, AHEMDABAD , the dispute was in respect of plastic scrap generated during the course of separation of rejected old batteries and as such covers the disputed issue completely - Following decision of Commissioner of Central Excise, Pondicherry Vs. Tanfac Industries Ltd. 2012 (6) TMI 640 - CESTAT, CHENNAI - old waste and scrap generated through breaking of the capital goods or crushing or hammer of the same does not result in emergence of any excisable goods - Decided against Revenue.

Summary

Issues:
1. Whether the waste and scrap generated during the dismantling of old and rejected batteries is liable to Central Excise duty.
2. Whether the appellants suppressed facts with intent to evade payment of duty.
3. Applicability of extended period of limitation and imposition of penalty.

Issue 1 - Liability of Central Excise Duty on Waste and Scrap:
The case involved the manufacture of various lead products where the respondent purchased old batteries from both open market and registered manufacturers. The waste and scrap generated during the dismantling of these batteries was sold, with the Revenue contending that such activity constituted a process ancillary to 'manufacture' under the Central Excise Act. The department alleged duty evasion amounting to Rs. 5,05,702. The Commissioner (Appeals) set aside the demand, citing a Tribunal case where it was held that waste and scrap arising from dismantling old machinery is not liable to duty as it does not arise from a process of manufacture. The Commissioner emphasized that the waste generated did not attract Central Excise duty, leading to the rejection of the Revenue's appeal.

Issue 2 - Suppression of Facts:
The audit revealed that the appellants paid duty only on waste generated from duty-paid batteries, not on scrap from open market purchases. The department alleged suppression of facts by the appellants to evade duty payment. This non-disclosure of information led to the discovery of duty evasion, resulting in the issuance of a Show Cause Notice and subsequent confirmation of duty demand, interest, and penalty. However, the Commissioner's decision to set aside the demand based on the non-liability of the waste to duty also negated the suppression allegation.

Issue 3 - Extended Period of Limitation and Penalty Imposition:
The Commissioner held that since the waste was not liable to Central Excise duty, invoking the extended period of limitation or imposing an equal penalty was not sustainable. The judgment referenced various Tribunal decisions where it was established that waste and scrap generated from certain processes did not result in the emergence of excisable goods, thereby supporting the rejection of the Revenue's appeal. The settled case law in similar matters further strengthened the decision to dismiss the appeal and uphold the non-leviability of duty on the waste and scrap in question.