2012 (10) TMI 930 - AT - Central Excise

Duty demand - Whether used fire brick and broken asbestos sheets cleared as waste and scrap from the factory are chargeable to duty or not? - Held that - department seeks to charge duty on the fire brick s waste under sub-heading 6901.90 and asbestos sheets waste under Heading 6804.20, on going through these headings, we find none of these sub-headings cover waste and scrap. In fact there is no heading in Chapter 69 to cover waste and scrap of ceramic materials and similarly, sub-heading 68.04 also does not cover waste and scrap of asbestos sheets. In view of this, we are of the view that fire brick scrap and asbestos sheets are not excisable. Moreover during the period of dispute there was no provision in the Cenvat Credit Rules, that when Cenvated capital goods are cleared as waste and scrap, an amount of equal to duty on sale price of such waste and scrap would be chargeable to duty. Such provision was intended by inserting Rule 3(5A) with effect from 16-5-2005 while the period of dispute in this case is prior to this date - Decided in favour of assessee.

Summary

Issues:
- Whether waste in the form of used fire brick and asbestos sheet waste cleared as scrap from the factory is chargeable to duty or not?
- Whether Cenvat credit availed capital goods cleared as waste and scrap would attract duty during the period of dispute from 1-10-2001 to 31-3-2003?

Analysis:
1. The appellant, a manufacturer of electrical insulators, faced a dispute regarding the chargeability of waste in the form of used fire brick and broken asbestos sheets cleared as scrap from the factory. The CCE (Appeals) upheld the duty demand on these items under Rule 3(5A) of the Cenvat Credit Rules, 2004. The appellant challenged this decision through an appeal.

2. The appellant's counsel argued that fire brick waste and asbestos sheet waste were not excisable under the Central Excise Tariff Act. They also highlighted the absence of a provision in the Cenvat Credit Rules during the dispute period, asserting that duty on capital goods cleared as waste and scrap should not apply retroactively, as the relevant provision came into effect after the dispute period.

3. The respondent defended the duty demand by supporting the Commissioner (Appeals) decision.

4. Upon hearing both sides, the Tribunal found that the sub-headings used by the department to charge duty on fire brick waste and asbestos sheet waste did not cover waste and scrap specifically. Chapter 69 and sub-heading 68.04 did not encompass waste and scrap of ceramic materials or asbestos sheets. As a result, the Tribunal concluded that fire brick scrap and asbestos sheets were not excisable. Additionally, since the provision for charging duty on capital goods cleared as waste and scrap was introduced after the dispute period, the Tribunal held that the impugned order was unsustainable. Consequently, the Tribunal set aside the decision of the Commissioner (Appeals) and allowed the appeal filed by the appellant.