2017 (9) TMI 1175 - AT - Central Excise

N/N. 89/95-CE dated 16.5.1995 - clearance of scrap without payment of duty - Department entertained a view that the scrap cleared without payment of duty under N/N. 89/95 is not eligible for the respondent for the reason that the said notification grants exemption to the scrap only when such scrap arises during the course of manufacture or exempted goods - Held that - since the manufactured goods are exempted goods, the benefit of Notification No.89 of 1995 dated 18.5.1995 would be applicable - appeal dismissed - decided against Revenue.

Summary

Issues:
Interpretation of Notification No. 89/95-CE for exemption on scrap arising during manufacture of exempted goods.

Detailed Analysis:

The case involved the respondents, manufacturers of passenger coaches for Indian railways, who availed exemption under Notification No. 62/95-CE for manufacturing steel freight containers and parts of railway coaches. The issue arose when the department contended that the scrap cleared without payment of duty under Notification No. 89/95 was not eligible for exemption since the respondents had cleared railway coaches and parts on payment of duty to other entities. A show cause notice was issued demanding duty on the cleared scraps and imposing penalties. The original authority confirmed the duty demand and penalties, leading to an appeal by the respondents (manufacturers) against this decision.

During the appeal, the department reiterated that the respondents were not eligible for the exemption under Notification No. 89/95. However, it was highlighted that in a previous case of the respondents, the Hon'ble High Court of Madras had ruled in favor of the assessee regarding a similar issue. The High Court dismissed the department's appeal, stating that as long as the manufactured goods are exempted, waste scrap arising during their manufacture would be entitled to exemption under Notification No. 89/95-CE. The High Court emphasized that the erroneous payment of duty would not render the goods as other than exempted goods.

Based on the precedent set by the High Court judgment in the respondent's previous case, the appellate tribunal found no grounds for interference in the impugned order. Consequently, the appeal was dismissed, upholding the decision in favor of the respondents (manufacturers). The tribunal's decision aligned with the interpretation that waste scrap arising during the manufacture of exempted goods is entitled to exemption under Notification No. 89/95-CE, as clarified by the Hon'ble High Court of Madras in the earlier case of the same respondents.