2017 (6) TMI 42 - AT - Central Excise

Warehousing of goods - waste - whether the assessee M/s Jindal Saw Ltd. should have paid Customs duty or Central Excise duty on the finished products namely steel pipes under the fact that they were granted Customs license for private bonded warehouse u/s 58 of the CA 1962 for storage of raw material without payment of Customs duty? - Held that - in view of the findings of the learned Commissioner (Appeals) being order dated 31/01/2006 Appeal No.14 CE/06 which is in conformity with the view expressed by the Board vide the clarification dated 9th May 2006 the appellant assessee have rightly paid Central excise duty on the finished products and have rightly paid Customs duty on the waste and scrap generated in the course of manufacture cleared in DTA - appeal allowed - decided in favor of assessee.

Summary

Issues:
1. Whether the assessee should have paid Customs duty or Central Excise duty on finished products stored in a bonded warehouse.
2. Validity of show cause notices demanding differential duty for short levy.

Issue 1:
The appeals were filed against an Order-in-Appeal passed by the Commissioner of Central Excise & Customs, Lucknow, regarding the payment of Customs duty or Central Excise duty on finished products stored in a bonded warehouse. The appellant, M/s Jindal Saw Ltd., was granted a Customs license for a private bonded warehouse under Section 58 of the Customs Act, 1962, for storage of raw material without payment of Customs duty. They were also permitted for in-bond manufacturing under Section 65 of the Act. The appellant procured steel plates and connectors at nil rate of Customs duty for manufacturing steel pipes supplied to ONGC Ltd. Three show cause notices were issued demanding differential duty for short levy, as the appellant paid Central excise duty on finished products, while revenue argued Customs duty should have been paid.

The Additional Commissioner confirmed a demand of Rs. 3,50,270 under Section 28(2) of the Customs Act, with interest and penalty. However, the Commissioner (Appeals) allowed the appeal, setting aside the Order-in-Original. The Commissioner observed that the demand of Customs duty on the value of steel plates and connectors in waste/scrap was not sustainable as the appellant correctly paid duty on waste and scrap as imported, as per the conditions laid down by the Assistant Commissioner.

Issue 2:
The show cause notice demanded differential duty on the clearance of steel scrap, alleging that Customs duty should have been paid on the import price of steel sheets and connectors. The appellant paid duty at the scrap value, resulting in a demand of Rs. 90,584 under Section 20 of the Customs Act. However, in light of a clarification by the CBEC, it was held that the show cause notice was not sustainable. The appellant was found to have rightly paid Central excise duty on finished products and Customs duty on waste and scrap generated during manufacturing.

In conclusion, the Tribunal allowed the appeal filed by the appellant-assessee and dismissed the appeal filed by revenue. The appellant was entitled to consequential benefits in accordance with the law. The Tribunal held that the appellant correctly paid Central excise duty on finished products and Customs duty on waste and scrap, as per the clarification provided by the CBEC.