2007 (11) TMI 171 - AT - Central Excise

Demand of duty on waste and scrap of capital goods - revenue demand duty on the impugned goods (scrap) considering it as final products manufactured from the inputs - goods cleared are metal scrap and an item of used filter coil - assessee is engaged in the manufacture of various chemicals and cannot be held to have manufactured the metal scrap or filter coil demand imposed invoking 3(5A) of cenvat credit rules is not justified

Summary

Issues:
Challenge to demand of duty on waste and scrap of capital goods, applicability of sub-rule (5A) of Rule 3 of CENVAT Credit Rules, 2004, whether the impugned goods were final products manufactured by the appellants.

Analysis:

1. Challenge to Demand of Duty on Waste and Scrap:
The appeal challenges an order affirming a demand for duty on waste and scrap of capital goods cleared by the appellants, along with interest and penalty. The demand was based on the assumption that the goods cleared were final products manufactured by the appellants. However, it was argued that the appellants were not engaged in manufacturing the metal scrap or filter coil, which were merely waste and scrap items. The Commissioner's reliance on sub-rule (5A) of Rule 3 of CENVAT Credit Rules, 2004 to justify the demand was deemed legally unsustainable. The original authority's order demanding duty on the impugned goods as final products was also found to lack legal basis. Consequently, the impugned order affirming the original order was set aside, and the appeal was allowed.

2. Applicability of Sub-rule (5A) of Rule 3 of CENVAT Credit Rules, 2004:
The Commissioner had invoked sub-rule (5A) of Rule 3 of CENVAT Credit Rules, 2004 to justify the demand on the basis that the goods cleared were capital goods in the form of waste and scrap. However, it was observed that the appellants, engaged in the manufacture of various chemicals, could not be considered as having manufactured the metal scrap or filter coil. Therefore, the application of sub-rule (5A) to justify the demand was deemed incorrect and not legally sustainable. The demand of duty at the rate of 16% ad valorem on waste and scrap was also found to lack legal basis.

3. Nature of Impugned Goods as Final Products Manufactured by Appellants:
The core issue revolved around whether the impugned goods, namely metal scrap and a used filter coil, were final products manufactured by the appellants. It was argued that the goods were waste and scrap of inputs/capital goods and had not been manufactured by the appellants. The original authority's order demanding duty on the impugned goods as final products was deemed legally unsustainable, leading to the setting aside of the impugned order and allowing the appeal. The lack of legal basis for considering the waste and scrap items as final products manufactured by the appellants was a critical factor in the judgment's outcome.

This comprehensive analysis of the judgment highlights the key issues involved, the legal reasoning applied, and the ultimate decision reached by the Appellate Tribunal CESTAT, CHENNAI in setting aside the impugned order and allowing the appeal.