2018 (4) TMI 658 - AT - Central Excise

Excisability - manufacture - scrap of old and used machinery cleared from their factory - Held that - There is no doubt waste and scrap generated during machining would be excisable - The Order-in-Original does not give any detail findings regarding process which resulted in generated of items Waste and scrap generated out of manufacturing M.S. heavy scrap and Waste and scrap M.S. fabricated pipes, angles, channels etc. The original Adjudicating Authority directed to examine the process which resulted in generated of item mentioned - appeal allowed by way of remand.

Summary

Issues:
- Demand of Central Excise duty, interest, and penalty on scrap of old and used machinery cleared from the factory
- Whether the scrap generated due to wear and tear of spares amounts to manufacture and attracts Central Excise duty
- Examination of the process resulting in the generation of waste and scrap items listed in the order
- Adequacy of findings in the Order-in-Original regarding the excisable duty liability

Analysis:
The appeal was filed against the demand of Central Excise duty, interest, and penalty on the scrap of old and used machinery cleared from the factory. The appellant argued that the scrap generated due to wear and tear of spares does not amount to manufacture, hence Central Excise duty should not be applicable. It was highlighted that the Order-in-Original confirmed a part of the demand while dropping another part, and reference was made to a similar issue in another case. The Tribunal noted that the cleared scrap was a result of wear and tear and scraping of old machinery parts, which does not attract Central Excise duty as it is not a result of a manufacturing process. Consequently, the demand on the said scrap was dropped. However, the order mentioned that certain activities in the factory workshop amounted to manufacture, and hence, the demand on goods cleared from the factory workshop was confirmed.

The Order-in-Original categorized the waste and scrap into four items, confirming the demand on some and dropping it on others. The Tribunal observed that waste and scrap generated during machining would be excisable. Still, detailed findings regarding the process resulting in the generation of items listed in two specific categories were lacking in the Order-in-Original. Therefore, the Tribunal considered the order to be non-speaking and set it aside. The matter was remanded to the original Adjudicating Authority for a detailed examination of the process resulting in the generation of waste and scrap items listed in the order to determine the excisable duty liability properly. Consequently, the appeal was allowed by way of remand to the adjudicating Authority for further examination and decision.

In conclusion, the Tribunal's decision revolved around the determination of Central Excise duty liability on the scrap of old and used machinery cleared from the factory. The judgment clarified that scrap resulting from wear and tear of machinery parts does not attract Central Excise duty, while emphasizing the necessity of detailed findings regarding the process leading to the generation of specific waste and scrap items for excisable duty liability determination.