2012 (9) TMI 871 - AT - Central Excise

Duty demand - Whether, for the period from April 1995 to March 1999, they are liable to pay duty of Rs.31,25,625/- on aluminium scrap which was generated during the process of manufacture of their final product and subsequently used by M/s. Bharath Foundry and Engineering Works (BFEW for short) in the manufacture of ingots in the assessee s factory - Held that - billets/ingots were cleared on payment of duty and, if that be so, the input viz., aluminium scrap generated in the course of manufacture of final products in the factory was not chargeable to duty of excise by virtue of Notification No.67/95-CE dated 16.3.95. In this context, it is pertinent to note that the appellant had filed a classification list in respect of aluminium scrap classifying it under sub-heading 7602.00 both for home consumption and for captive consumption, a fact clearly acknowledged in the Commissioner s order. That classification list also claimed the benefit of the above notification. appellant has also made out a formidable case against the demand of duty on the ground of limitation. The impugned demand is for the period from April 1995 to March 1999 and the same was raised in show-cause notice issued on 26.4.2000. The show-cause notice invoked the proviso to subsection (1) of Section 11A of the Central Excise Act but did not allege fraud, collusion or suppression of facts and the like. The notice alleged that certain provisions of the Central Excise Rules were contravened by the assessee, but even in this context, no intent to evade payment of duty was attributed to the assessee. In other words, the show-cause notice did not allege any of the ingredients of the proviso to Section 11A(1) of the Act. It appears, the department could not allege anything of the above sort against the assessee who was forthright in declaring aluminium scrap as one of the products in the classification list effective from 16.3.1995 and claiming the benefit of Notification No.67/95-CE in respect of captive consumption of the scrap - Decided in favour of assessee.

Summary

Issues:
1. Liability to pay duty on aluminum scrap generated during manufacturing process and used by another entity for further processing.
2. Interpretation of Central Excise Rules regarding clearance of scrap for job work.
3. Exemption claim under Notification No.67/95-CE for captive consumption.
4. Demand of duty within the limitation period.

Analysis:

1. The main issue in this appeal was the liability of the assessee to pay duty on aluminum scrap generated during the manufacturing process and used by another entity for further processing. The show-cause notice alleged that the scrap should have been cleared on payment of duty when transferred to the job worker for conversion into ingots. The appellant contended that they had only given a labor contract for the conversion of scrap into ingots within their factory premises under their supervision. The Tribunal found that the scrap was not cleared outside the factory for job work and was used for captive consumption in the manufacturing process, which did not attract duty payment.

2. The Tribunal analyzed the contract between the appellant and the entity performing the conversion process, which clearly stated that the scrap would be melted within the appellant's premises under their supervision. It was established that the conversion process was carried out within the factory premises using labor provided by the other entity, and no job work was involved. The Tribunal noted that the appellant's submissions and the contract provisions were not refuted by the adjudicating authority, leading to the conclusion that the scrap was cleared for captive consumption within the factory.

3. Regarding the exemption claim under Notification No.67/95-CE for captive consumption, the Tribunal observed that the appellant had filed a classification list classifying the aluminum scrap for captive consumption, claiming the benefit of the said notification. The classification list was acknowledged in the Commissioner's order, and there was no indication of disapproval. Since the ingots produced from the scrap were cleared on payment of duty, the input scrap was not chargeable to excise duty under the notification.

4. The Tribunal also addressed the issue of demand of duty within the limitation period. It was noted that the demand was raised for a specific period, and the show-cause notice did not allege any fraudulent intent or suppression of facts by the assessee. The notice did not invoke the proviso to Section 11A(1) of the Central Excise Act, indicating that there was no allegation of evasion of duty. The appellant had declared the aluminum scrap in the classification list and claimed the benefit of the exemption notification, further strengthening their case against the demand of duty.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal in favor of the appellant.