2007 (12) TMI 100 - AT - Central Excise

Revenue submitted that waste and scrap of empty containers of aluminium/MS/Tins are as a result of manufacture by the respondent and hence, they would attract duty - aluminium/MS/Tins in which the pesticide is received by manufacturers(because of defectiveness) could not be treated to be a waste arising out of processing of the inputs for which credit has been taken - No duty leviable on impugned containers (in which goods were received back), which were cleared from factory as waste & scrap

Summary

Issues:
- Availing credit on rejected pesticides and clearing them as manufactured goods
- Demand for duty on scrap cleared under Section 11A
- Applicability of Rule 16 of Central Excise Rules, 2002
- Interpretation of waste and scrap after processing

Analysis:

The appeal addressed the issue of availing credit on rejected pesticides and clearing them as manufactured goods. The respondent processed the rejected pesticides, considered as manufacturing, and disposed of the resulting scrap. A show cause notice demanded duty on the cleared scrap under Section 11A, with an imposed penalty. The appellate authority favored the respondent, citing Tribunal decisions. The revenue contended that duty was owed on the scrap as a result of manufacturing. The respondent argued that Supreme Court and Tribunal judgments supported their position.

The Tribunal analyzed the situation, noting the respondent's utilization of Rule 16 of the Central Excise Rules, 2002. Rule 16 allows credit on duty-paid finished goods returned for processing, akin to manufacturing. The Tribunal referenced the Supreme Court's ruling in a similar case, stating that waste from processing inputs for which credit was taken did not incur duty. Additionally, a Tribunal decision supported the non-levy of duty in comparable circumstances.

Ultimately, the Tribunal upheld the impugned order, aligning with the Supreme Court's decision and rejecting the revenue's appeal. The judgment emphasized that the waste and scrap resulting from the processing of returned goods fell under the category of inputs, exempting them from duty. The decision highlighted the settled nature of the issue in favor of the respondent, based on legal precedents.