2016 (8) TMI 446 - AT - Central Excise

Classification - worn out Silver targets - Whether to be classifiable under Chapter Subheading No. 7101.80 attracting 16% rate of duty as per Department or under Chapter Subheading No. 7101.31 which attracts NIL Rate of Duty - Held that - the decision of Tribunal in the case of OEN (I) Ltd. Vs. CCE Cochin 1997 (7) TMI 249 - CEGAT, NEW DELHI is squarely applicable to the present case where the remnants of silver strips have lost only their original shape and the remaining portion after being punched had not lost the purity and therefore is classifiable under chapter subheading No. 7101.31. It was also held that scrap is normally understood in common parlance as waste having less or no intrinsic value and that the said punched Silver Strips on re-melting and re-rolling are converted again into Silver Strips. Therefore, remnants of silver strips are not waste and scrap. By applying the same, we hold that worn out Silver Targets are classifiable under chapter subheading No. 7010.31 attracting NIL rate of duty. - Decided in favour of appellant

Summary

Issues: Classification of worn-out Silver Targets under Central Excise duty

Analysis:
1. Facts of the Case: The appellants, manufacturers of Recordable Compact Discs, used Silver Targets as inputs for their product. When the Silver from the Silver Targets got depleted during the manufacturing process, the worn-out Silver Targets were removed and sold as Silver bullion.

2. Show Cause Notice: The Department issued a Show Cause Notice contending that the worn-out Silver Targets were scrap classifiable under Chapter Subheading No. 7101.80, attracting a 16% rate of duty. The appellants had classified it under Chapter Subheading No. 7101.31, which attracted a NIL rate of duty. The demand for Central Excise duty was for ?10,32,405/- with additional penalty proposals.

3. Order-in-Original: The original authority held that the Silver Targets, once depleted, became waste and scrap of silver, confirming the duty demand and imposing penalties on the appellants. The Commissioner (Appeals) upheld the Order-in-Original, stating that the Silver in the worn-out Silver Targets was around 97% to 98%, directing the sale proceeds to be treated as cum duty value.

4. Appellants' Contention: The appellants argued that the Commissioner's observation regarding the Silver content was not factual. They claimed that the Silver in the worn-out Silver Targets was actually 99.99%, as confirmed by the purchasers. They contended that the worn-out Silver Targets should be classified under Chapter Subheading No. 7101.31, attracting a NIL rate of duty, citing a previous Tribunal decision.

5. Legal Arguments: The appellants' counsel argued that the worn-out Silver Targets, with a purity of 99.9%, should not be classified under Chapter Subheading No. 7101.80 as waste and scrap. They maintained that the classification of new and worn-out Silver Targets should not differ, as the Silver depletion during manufacturing did not change the classification. They also referenced a Tribunal decision in support of their argument.

6. Department's Position: The Departmental Representative contended that the worn-out Silver Targets, once depleted, could not be reused and were therefore waste and scrap, classifiable under Chapter Subheading No. 7101.80.

7. Tribunal's Decision: The Tribunal compared the case to a previous judgment involving silver strips, where remnants were not considered waste and scrap due to their retained purity. Applying the same reasoning, the Tribunal held that the worn-out Silver Targets were not waste and scrap but classifiable under Chapter Subheading No. 7101.31, attracting a NIL rate of duty. The impugned order was set aside, and the appeal was allowed with consequential relief, including for the Director involved. No costs were awarded in the matter.