2012 (11) TMI 1024 - AT - Central Excise

Clearance of goods without payment of duty in terms of Notification No. 4/2006-C.E. dated 1-3-2006 - Held that - slag emerges during the course of manufacture of final product and is removed and contained in slag pot. Merely because appellant find a customer for the same there is no reason to hold the slag removed by the appellant is a final product. It stands held by the Tribunal in a number of decisions that provision of Rule 6 applies to the final product and not to waste and scrap emerging during the course of manufacture of final product. Hon ble Bombay High Court in the case of Rallis India Ltd. v. Union of India - (2008 (12) TMI 46 - HIGH COURT BOMBAY) has held that liability to pay 10% of value of exempted product in terms of erstwhile Rule 57CC (now Rule 6) arises only for final product and not for waste. Inasmuch as slag is admittedly a waste product no liability would arise in terms of provisions of Rule 6 in terms of the above decision of the Bombay High Court - Decided in favour of assessee.

Summary

Issues:
1. Whether the appellants are liable to pay duty on the slag removed during the manufacturing process.
2. Interpretation of Rule 6 in relation to the final product and waste/scrap.
3. Applicability of Tribunal and High Court decisions in determining liability under Rule 6.

Analysis:

1. The appellants, engaged in manufacturing ingots and M.S. Runner Riser, faced proceedings for not paying duty on slag removed during the manufacturing process. The issue was whether the slag, considered waste by the appellants, attracted duty liability. The original adjudicating authority demanded payment of 10% value of the slag, leading to a penalty. The appellant argued that the slag was waste, not a final product, and hence not subject to duty. They cited precedents to support their stance.

2. The crux of the matter revolved around the interpretation of Rule 6 concerning the treatment of final products versus waste and scrap. The appellate authority upheld the duty demand, considering the slag as an excisable item under the Tariff Act. However, the appellant contended that Rule 6 applied to final products, not waste like slag. They relied on the Tribunal's decision and other precedents to support their argument, emphasizing that the provision did not cover waste and scrap.

3. The final judgment delved into the applicability of Tribunal and High Court decisions in determining liability under Rule 6. The Tribunal concluded that the slag, emerging during the manufacturing process and treated as waste, did not qualify as a final product. Citing the Bombay High Court's ruling, the Tribunal clarified that liability under Rule 6 pertained to final products, not waste. As the slag was considered waste, the Tribunal set aside the impugned orders, allowing the appeal with consequential relief. This decision aligned with established legal principles and precedents, emphasizing the distinction between final products and waste/scrap in duty liability assessments.

Overall, the judgment clarified the application of Rule 6 in distinguishing between final products and waste during manufacturing processes, providing a nuanced interpretation based on legal precedents and established principles.