2015 (2) TMI 1007 - AT - Central Excise

CENVAT Credit - Inputs - Removal of waste and scrap as such - Held that - Following decision of Madras Cements Ltd. vs. CCE, Trichy reported in2010 (7) TMI 398 - CESTAT, CHENNAI - Decided against Revenue.

Summary

Issues:
1. Duty liability on clearance of damaged HDPE bags as scrap without payment of central excise duty.
2. Applicability of Rule 3(5) of the Cenvat Credit Rules, 2004.
3. Interpretation of waste and scrap arising during the manufacturing process.

Analysis:
Issue 1: The main issue in this case revolves around the duty liability imposed on the clearance of damaged HDPE bags as scrap without payment of central excise duty. The respondent, engaged in cement manufacturing, cleared a specific quantity of such bags without duty payment, leading to the demand confirmed by the adjudicating authority. The crux of the matter was whether the clearance of these damaged bags constituted a removal as such under Rule 3(5) of the Cenvat Credit Rules, 2004.

Issue 2: The applicability of Rule 3(5) of the Cenvat Credit Rules, 2004 was crucial in determining the duty liability in this case. The Revenue contended that the waste and scrap emerging from inputs, on which credit had been availed, were cleared without payment of duty in violation of Rule 3(5). On the other hand, the respondent argued that the waste and scrap of HDPE bags arising during the manufacturing process did not attract duty liability, citing precedents and interpretations.

Issue 3: The interpretation of waste and scrap arising during the manufacturing process was a significant aspect of the case. The respondent's counsel relied on a decision by the Tribunal in a similar matter involving Madras Cements Ltd., emphasizing that the waste and scrap generated during the manufacturing process should not incur duty liability. The Tribunal, in line with its previous rulings, dismissed the appeal of the Revenue, indicating a consistent approach in such cases.

In conclusion, the Tribunal's judgment upheld the respondent's position, citing precedents and interpretations to support the dismissal of the Revenue's appeal. The decision reaffirmed the principle that waste and scrap arising during the manufacturing process may not attract duty liability, as established in earlier cases such as Madras Cements Ltd. vs. CCE, Trichy.