2017 (9) TMI 1183 - AT - Central Excise

Clearance of Waste and Scrap - Rule 57-S(2)(c) - scrap and waste has arisen out of the cenvatable capital goods - Held that - The demand stands confirmed by Commissioner (Appeals) in terms of the provisions of Rule 57-S (2) (c) It is noted that such provision was deleted from the statute with effect from 01.04.2000. As such as rightly contended by the ld. advocate the demand for the period post 01.04.2000 cannot be confirmed. As for the period prior to 01.04.2000 by appreciating the nature of the waste and scrap as detailed in the annexure to the show cause notice we note that the same is not scrap of capital goods. The provisions of Rule 57S (2)(c) get invoked only when the capital goods themselves are removed as waste and scrap and does not govern the waste and scrap arisen during the course of maintenance replacement or repair of the capital goods. As such in our views the Commissioner (Appeals) has proceeded on wrong footing. Appeal restored to Order-in-Original - matter on remand.

Summary

Issues:
1. Whether demand for duty on waste and scrap arising from the repair and maintenance of capital goods is valid.
2. Interpretation of Rule 57-S (2) (c) regarding the levy of duty on waste and scrap.

Analysis:
1. The appellant, engaged in textile manufacturing, faced a demand for duty on waste and scrap generated during the repair and maintenance of capital goods. The original adjudicating authority accepted the appellant's argument that the waste and scrap were a result of repair and maintenance activities, not removal of capital goods. Citing precedent, the authority ruled in favor of the appellant, aligning with a Tribunal decision and a Supreme Court ruling. The authority also considered relevant circulars in vacating the show cause notice.

2. The Revenue challenged the decision before the Commissioner (Appeals), who upheld the demand based on Rule 57-S (2) (c), which imposes duty on waste and scrap from sold capital goods. Upon review, it was noted that the period in question was from April 1998 to September 2001, and Rule 57-S (2) (c) was no longer in effect from April 1, 2000. Citing a previous Tribunal case, it was established that demands post-April 2000 under this rule were not valid.

3. For the period before April 2000, the Tribunal analyzed the nature of the waste and scrap listed in the show cause notice and concluded it did not constitute scrap of capital goods. Rule 57-S (2) (c) applies when capital goods themselves are sold as waste and scrap, not to waste and scrap generated during maintenance activities. Therefore, the Commissioner (Appeals) was deemed to have erred in upholding the demand, leading the Tribunal to set aside the decision and allow the appeal by restoring the Order-in-Original.