2022 (6) TMI 709 - HC - Central Excise

Removal of scraps - authorized removal or not - permission under Rule 57F (2) of the Excise Rules for reprocessing of inputs required from the applicant authorities before removal of various types of scraped cables and lead scraps for reprocessing to the factory of job workers or not - loss which waste and scrape of copper arising during reprocessing has to be returned to the factor or not - extension of time if loss not returned within 60 days - suppression and willful mistake or not - invocation of extended period of limitation - HELD THAT - The order passed by the Tribunal was just and proper and does not call for any interference. Extended period of limitation - HELD THAT - To invoke the power under Section 11A that is to invoke the extended period of limitation there should be a clear finding of willful mis-statement or suppression on the part of the assessee with an intent to avoid payment of duty. On perusal of the show-cause notice, it is found that there is absolutely no such allegation against the assessee and this aspect of the matter is not disputed by the revenue. The allegation against the assessee was that of not properly maintaining the register required to be maintained in terms of Rule 57F(2) of the Rules. If such is the allegation against the assessee, the adjudicating authority committed a serious error in invoking the power under Section 11A of the Act - A reading of the show-cause notice clearly shows that the information was gathered from the registers and challans maintained by the assessee and the show-cause notice is not on account of any discovery of new facts by the department either by conducting an inspection or based on intelligence. Therefore, the Tribunal was right in holding that the extended period of limitation could not have been invoked by the authority. Non-payment of duty of waste and scrap - HELD THAT - The decision of the Tribunal in FINOLEX CABLES LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, PUNE 1995 (4) TMI 190 - CEGAT, NEW DELHI will clearly apply and support the assessee s case, where it was held that waste and scrap of wires and cables are not excisable goods and the question of their classification under CETA, 1985 does not arise. The learned Advocate appearing for the respondent also placed reliance of the decision of the Tribunal in CCE MUMBAI VERSUS CHEMICAL PROCESS EQUIPMENT PVT. LTD. 2018 (1) TMI 47 - CESTAT MUMBAI wherein it was held that duty proposed on aluminium scrap is not sustainable. The decision in the case of ITEL INDUSTRIES LTD. VERSUS ASSISTANT COMMISSIONER OF CENTRAL EXCISE, DIVISION-I, PALAKKAD 2011 (8) TMI 621 - KERALA HIGH COURT relied on by the revenue is clearly distinguishable on facts where the Court found a clear infraction of the procedure required to be followed / adopted under Rule 57A of the Act. Therefore, the said decision will not render any assistance to the case of the revenue - In the instant case, there is no intermediary product such as cable scrap as the essential character of the telecommunication cables is that it should be capable of conducting electricity. If it fails such a test then it qualifies to be termed as scrap. As already pointed out, there was no allegation of any willful mis-statement or suppression of fact by the assessee with an intent to avoid payment of duty and therefore, the power under Section 11A of the Act could not have been invoked by the authority. The order passed by the Tribunal does not call for interference - appeal dismissed - decided against Revenue.

Issues Involved:
1. Requirement of permission under Rule 57F(2) for reprocessing of inputs.
2. Unauthorized removal of scrap.
3. Duty liability on waste and scrap not returned within a specified period.
4. Applicability of the extended period of limitation under Section 11A of the Central Excise Act, 1944.

Detailed Analysis:

1. Requirement of Permission under Rule 57F(2):
The revenue questioned whether the respondent needed to obtain permission under Rule 57F(2) before removing scraped cables and lead scraps for reprocessing. The respondent argued that they had followed the procedure since 1962 and had applied for and received the necessary permissions from the Assistant Collector of Central Excise. The Tribunal noted that the respondent had opted for clearance of waste and scrap under Rule 57F(2) with due permission from the jurisdictional Central Excise Authority, thus no duty could be levied on the same.

2. Unauthorized Removal of Scrap:
The revenue alleged that the respondent removed 544.283 M.T. of lead scrap without obtaining permission under Rule 57F(2). The respondent contended that they had applied for and received the necessary permissions and that any procedural lapses should not result in a duty demand. The Tribunal supported the respondent's claim, noting that the removal was authorized and no duty could be levied.

3. Duty Liability on Waste and Scrap:
The revenue claimed that the respondent did not return the waste and scrap to their factory nor paid the appropriate duty, showing the short-received quantity as "process loss." The Tribunal, referencing the decision in *Finolex Cables Ltd. vs. Collector of Central Excise*, held that PVC waste and scrap were not excisable and hence not liable for duty. It concluded that the waste and scrap generated did not possess the characteristics of the final product and thus were not subject to excise duty.

4. Applicability of the Extended Period of Limitation:
The revenue invoked the extended period under Section 11A, alleging suppression and willful misstatement by the respondent. The Tribunal found no such allegations in the show-cause notice, which was based on information from the respondent's records. It concluded that the extended period could not be invoked as the notice did not result from any new discovery by the department. The Tribunal emphasized that the power under Section 11A requires a clear finding of willful misstatement or suppression, which was absent in this case.

Conclusion:
The Tribunal's order was upheld by the High Court, affirming that the respondent had complied with the necessary procedures under Rule 57F(2) and that the waste and scrap were not excisable. The extended period of limitation under Section 11A was not applicable due to the absence of willful misstatement or suppression. The appeal was dismissed, and the substantial questions of law were answered against the revenue.

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