2017 (4) TMI 207 - AT - Central Excise

Whether the appellant during the relevant period, being a 100% Export Oriented Unit could have cleared items like scrap into DTA without obtaining permission and without payment of appropriate duty payable thereon? - Held that - if the claim of the appellant that old machineries which were dismantled and cleared as scrap, were those machineries on which credit as capital goods were not utilised, nothing survives which could enable the department to demand Central Excise duty even if it is a fact that the said scrap was cleared after the appellant being granted status of EOU - since the scrap which has been cleared are in the form of old and used drums and claimed to have been received prior to appellant getting the status of EOU, in the facts of this case, demand of duty on the appellant seems to unwarranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether a 100% Export Oriented Unit could clear items like scrap into DTA without permission and payment of appropriate duty.

Analysis:
The judgment pertains to three appeals concerning the same assessee and issue, where the appellant, a 100% Export Oriented Unit, cleared scrap items into DTA without permission or payment of duty. The central issue was whether the appellant was liable to pay Central Excise duty on the cleared scrap. Show cause notices were issued to recover duty and impose penalties, which were confirmed by the adjudicating authority and the first appellate authority.

Upon review, the Tribunal considered the appellant's argument that the cleared items were scrap from dismantling old machinery, on which no capital goods credit was availed, making them non-excisable. The Tribunal noted that lower authorities did not contradict this argument. It was established that the scrap items were old drums, cable scrap, and plastic bags received before the appellant became an EOU. The Tribunal found no basis for the department to demand duty on these items, given the circumstances. Consequently, the impugned order was set aside, and the appeals were allowed.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Central Excise duty on the cleared scrap items. The decision was based on the appellant's valid argument regarding the nature of the scrap and the absence of utilization of capital goods credit, making the imposition of duty unwarranted in this case.