2017 (5) TMI 1374 - AT - Central Excise

CENVAT credit - Rule 3 (5A) of the CCR, 2004 - removal of Brass Tubes - removal as such or as waste? Held that - the appellant have removed used Brass Tubes as Brass Tubes and not as waste and scrap . In this view of the matter, the provisions of Rule 3 (5A) of the CCR, 2004, are not attracted - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether duty was rightly demanded from the appellant on clearance of old and used Brass Tubes for the extended period September 2004 to September 2008.

Analysis:
The appellant, engaged in the manufacture of Sugar & Molasses, used Brass Tubes in Boilers and later cleared the used Brass Tubes to their job worker for remaking or conversion into new Brass Tubes. The issue revolved around the demand of duty on the clearance of old Brass Tubes by the appellant. The Show Cause Notice dated 26/08/2009 demanded duty amounting to ?3,91,396 for the period from September 2004 to September 2008. The Notice was contested, and the demand was confirmed with penalties under Rule 25 read with Section 11AC of the Central Excise Act, 1944.

The appellant appealed before the Commissioner (Appeals), who partially set aside the demand prior to 16/05/2005 but confirmed the demand for the period after 16/05/2005, along with interest and penalties. The relief was granted based on Rule 3 (5A) of the Cenvat Credit Rules, 2004, introduced via Notification No. 27/2005-CE (NT) dated 16/05/2005, which required the manufacturer to reverse duty on the transaction value upon removal of waste and scrap of capital goods.

Challenging the Commissioner's decision, the appellant approached the Tribunal. The appellant's counsel argued that the used Brass Tubes were not removed as waste and scrap but as Brass Tubes to the job worker, making Rule 3 (5A) inapplicable. It was contended that the situation was revenue-neutral since any duty paid by the appellant would be credited to the job worker, resulting in lesser duty payment upon return of the remade Brass Tubes.

After reviewing the contentions and the records, the Tribunal concluded that the appellant had indeed removed the Brass Tubes as 'Brass Tubes' and not as 'waste and scrap.' Consequently, Rule 3 (5A) of the Cenvat Credit Rules, 2004, was deemed inapplicable. The appeal was allowed, and the impugned demand, along with penalties, was set aside.

This judgment highlights the importance of correctly categorizing goods for duty purposes and the application of relevant rules in determining duty liabilities. The Tribunal's decision focused on the specific nature of the goods removed by the appellant and their classification under the applicable rules, ultimately leading to the allowance of the appeal and the setting aside of the demand and penalties.