2017 (7) TMI 885 - AT - Central Excise

Waste/scrap - excisability - Whether the appellants M/s IOC is liable to pay duty on the scrap of capital goods and on the Spent Catalyst? - Held that - the issue of whether waste and scrap, which is generated in the course of manufacture due to scrapping of worn out parts of capital goods would attract any duty or require reversal of Cenvat Credit before 16.05.2005, when Sub Rule 5A to Rule 3 of Cenvat Credit Rules, 2004 was introduced, was settled by the judgment of Hon ble Madras High Court in the case of CCE, Pondicherry Vs. CESTAT 2013 (7) TMI 53 - MADRAS HIGH COURT , where it was held that when the scrap had not arisen out of manufacture, but arising on account of wear and tear in the absence of specific provision for such waste and scrap in the relevant rules, duty could not be demanded. As to the leviability on the excise duty on spent Zinc Oxide Catalyst, we find that the same is not a new product arising during the manufacture of final Petroleum products. Since no new item is emerging as a result of the manufacture, duty is not liable on the same. Appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether duty is payable on scrap of capital goods and spent Zinc Oxide Catalyst.

Analysis:
The appeal involved a dispute regarding the liability to pay duty on scrap of capital goods and spent Zinc Oxide Catalyst by a manufacturer of Petroleum products. The appellants contended that they were not liable to pay excise duty on the scrap as it was generated in the manufacturing process and not manufactured by them. They relied on various legal decisions to support their argument. The Revenue, on the other hand, supported the findings of the Ld. Commissioner (Appeals).

The main issue in the appeal was whether the appellants were liable to pay duty on the scrap of capital goods and spent Zinc Oxide Catalyst. The Tribunal analyzed the arguments presented by both parties. The appellants argued that the waste/scrap cleared by them were not excisable goods as they were generated in the manufacturing process of Petroleum products. The Tribunal referred to a judgment of the Hon’ble Madras High Court which clarified the issue of whether waste and scrap generated due to scrapping of worn out parts of capital goods attracted duty. The Tribunal found that the scrap cleared by the appellants were scrap of worn out capital goods and, based on the nature of the manufacturing activity, confirmed that duty was not liable on the same.

Regarding the liability on the excise duty on spent Zinc Oxide Catalyst, the Tribunal found that it was not a new product arising during the manufacture of final Petroleum products. The Tribunal referred to a Tribunal judgment which held that the transformation of a Catalyst into Spent Catalyst did not amount to manufacture. Therefore, the Tribunal concluded that excise duty was not leviable on the spent catalyst.

In conclusion, the Tribunal held that the order of the Ld. Commissioner (Appeals) was not sustainable and set it aside. The Tribunal allowed both the stay application and the appeal in favor of the appellants.

This detailed analysis of the judgment provides a comprehensive understanding of the legal issues involved, the arguments presented by both parties, and the Tribunal's reasoning leading to the final decision in the case.