2008 (3) TMI 185 - AT - Central Excise

Whether duty is payable on the scrap generated out of the fencing materials, jallis, box channels, beams, structural material and broken and damaged angles etc. no evidence is produced by the Revenue to show that the said scrap was generated out of the manufacturing activity and on which credit was availed - held that the burden is on the Revenue to show that the scrap was generated out of the capital goods, on which the Modvat was availed impugned waste/scrap is not dutiable

Issues:
1. Demand of excise duty on scrap removal.
2. Separate excise registration and maintenance of records.
3. Classification of scrap generated from non-modvat claimed materials.
4. Duty payment on scrap generated from non-manufacturing activities.
5. Failure to declare scrap removal in monthly returns.
6. Burden of proof on revenue to show scrap generation from excisable goods.
7. Applicability of previous tribunal decisions on duty payment for scrap.

Analysis:

Issue 1: Demand of excise duty on scrap removal
The appeal arose from the demand of Rs. 13,12,198 against the Appellants for the removal of scrap during a specific period, along with the imposition of a penalty of an equal amount. The Commissioner of Central Excise (Appeals) upheld the demand and penalty, leading to the appeal before the Tribunal.

Issue 2: Separate excise registration and maintenance of records
The Appellants operated multiple manufacturing units and non-manufacturing departments at their works, each with separate excise registrations and record-keeping practices. This included the declaration of waste and scrap generated from non-modvat claimed materials in classification lists.

Issue 3: Classification of scrap generated from non-modvat claimed materials
The Appellants contended that no excise duty was payable on scrap generated from specific materials like fencing materials, beams, etc., citing previous Tribunal decisions. They argued that the duty was paid on scrap arising from manufacturing activities, while scrap from non-manufacturing activities was not subject to duty.

Issue 4: Duty payment on scrap generated from non-manufacturing activities
The Tribunal accepted the Appellants' argument that duty was not payable on scrap from non-manufacturing activities, as supported by previous Tribunal decisions. The Revenue failed to provide evidence that the scrap in question arose from modvatable inputs, leading to the appeal being allowed on this ground.

Issue 5: Failure to declare scrap removal in monthly returns
The Revenue contended that the Appellants did not declare the removal of scrap in their monthly returns, hindering the verification of their claims. However, the Tribunal found no merit in this argument, as scrap from non-manufacturing activities did not need to be declared in the returns.

Issue 6: Burden of proof on revenue to show scrap generation from excisable goods
The Tribunal emphasized that the burden was on the Revenue to prove that the scrap subject to duty was generated from excisable goods on which credit was availed. Lack of evidence in this regard favored the Appellants' case.

Issue 7: Applicability of previous tribunal decisions on duty payment for scrap
The Tribunal relied on previous decisions to support the Appellants' position that no duty was payable on certain types of scrap. The lack of evidence from the Revenue to link the scrap to excisable goods further strengthened the Appellants' case.

In conclusion, the Tribunal allowed the appeal, setting aside the demand and penalty, as the Revenue failed to establish that the scrap in question was generated from excisable goods. The decision was based on the absence of evidence and the applicability of previous tribunal rulings supporting the Appellants' contentions.

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