2007 (3) TMI 189 - HC - Central Excise

MS Scrap did not arise out of mfg process but was part of building material of the construction activity Moreover no credit has been availed on this MS Scrap so held that waste material arising from building constriction is not liable to excise duty.

Summary

Issues:
Appeal against order of Custom Excise and Service Tax Appellate Tribunal regarding duty levied on removal of MS Scrap.

Analysis:
The appeal arose from the Custom Excise and Service Tax Appellate Tribunal's order allowing the respondent manufacturer's appeal against the duty levied on the removal of MS Scrap from the factory. The substantial question of law revolved around the confirmation of demand by the Adjudicating Authority concerning the reversal of Modvat Credit by the assessee in respect of MS heavy scrap of capital goods. The Revenue contended that the manufacturer's clear admission in the reply to the show cause notice indicated the removal of dutiable scrap, while the respondent argued that there was no admission regarding the duty levied on the scrap. The matter related to the period after the commencement of the Cenvat Rules, under which the levy of duty on removal of scrap and waste of inputs and capital goods on which Modvat Credit was availed was abolished. The Tribunal considered the manufacturer's submissions, where specific pleas were made regarding the nature of the scrap, and set aside the demand based on these averments.

The manufacturer argued that the MS scrap constituted waste material of building construction, on which no Modvat credit was availed. The adjudicating authority did not accept the manufacturer's plea initially, but the Commissioner (Appeals) affirmed the order. The Tribunal noted the manufacturer's stand that the MS Heavy scrap was leftover small pieces of building material and the aluminum scrap was old and used capital goods without credit taken. The Tribunal, based on the manufacturer's submissions, allowed the appeal and dismissed the demand. The Tribunal found that the MS Scrap in question was part of building material and non-dutiable as it did not arise from capital goods used in manufacturing or the manufacturing process. Consequently, the order of the Tribunal regarding the non-dutiable nature of the MS Scrap was upheld, and the appeal was dismissed with no costs awarded.