2018 (3) TMI 1418 - AT - Central Excise

Dutiability - scrap generated during the course of fabrication of capital goods - Revenue is of the view that waste and scrap is an excisable item in terms of Note 8A of Section 15 of Central Excise Tariff Act, therefore, they are required to pay duty on the waste and scrap - Held that - The waste has been generated on these items due to said activity - As the Hon ble Apex Court held in the case of Grassim Industries ltd. 2008 (7) TMI 79 - HIGH COURT RAJASTHAN that the said activity does not amount to manufacture. In that circumstances, in terms of Note 8A of Section 15 of the Central Excise Tariff Act, the appellant are not liable to pay duty - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against confirmed duty demand on scrap generated during fabrication of capital goods
- Interpretation of Note 8A of Section 15 of Central Excise Tariff Act
- Applicability of duty payment on waste and scrap generated during fabrication of capital goods or civil work
- Reversal of High Court decision by the Apex Court regarding the excisability of waste and scrap
- Submission of affidavit and certificate by the appellant to prove non-availment of cenvat credit

Analysis:
The appellant appealed against the confirmed duty demand on scrap generated during the fabrication of capital goods. The Revenue contended that waste and scrap are excisable items under Note 8A of Section 15 of the Central Excise Tariff Act, necessitating duty payment. The matter was adjudicated based on the decision of the Hon'ble High Court of Rajasthan, which held the appellant liable to pay duty. However, the appellant argued that the Hon'ble Apex Court had reversed the High Court decision, stating that the activity of fabrication of plant and machinery or civil work does not constitute manufacturing, hence waste and scrap generated are not excisable. The appellant also provided an affidavit and certificate from a Chartered Accountant certifying non-availment of cenvat credit on the items in question.

The Tribunal noted that the waste was generated during the fabrication of capital goods and civil work using steel items. Citing the decision of the Hon'ble Apex Court in the case of Grasim Industries Ltd., it was established that such activities do not amount to manufacturing. Consequently, as per Note 8A of Section 15 of the Central Excise Tariff Act, the appellant was not obligated to pay duty on the waste and scrap generated during these activities. The Tribunal also observed that the Commissioner had relied on the High Court decision, which had been overturned by the Apex Court. Therefore, the Tribunal held that the appellant was not liable to pay duty, leading to the setting aside of the impugned order.

In conclusion, the appeal was allowed with any consequential relief, if applicable, in favor of the appellant.