2023 (4) TMI 429 - AT - Central Excise

Levy of Excise Duty - scrap generated during the course of manufacture - appellant cleared scrap generated in the course of final product during the period 01.03.2006 to 31.12.2010 without payment of central excise duty - conversion work was undertaken in terms of Notification No.214/86-CE dated 25.03.1986 - HELD THAT - The issue is whether the scrap generated during the process of manufacture if liable to excise duty stands decided by the decision of the Hon ble Bombay High Court in the case of HINDALCO INDUSTRIES LIMITED VERSUS THE UNION OF INDIA, CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL, THE COMMISSIONER OF CENTRAL EXCISE 2014 (12) TMI 657 - BOMBAY HIGH COURT . The said decision was maintained by the Hon ble Apex Court in UNION OF INDIA VERSUS HINDALCO INDUSTRIES LIMITED 2019 (3) TMI 1933 - SC ORDER by dismissing the appeal filed by the Department. In view thereof, the demand of duty cannot sustain. Appeal allowed.

Summary

Issues involved:
The issue involved in this appeal is whether the scrap generated during the course of manufacture is liable for payment of excise duty.

Details of the judgment:
The appellants were engaged in the manufacture of boiler components and were found to have cleared scrap generated during the manufacturing process without payment of central excise duty. The investigation revealed that the appellants did fabrication work for BHEL and other companies, where the scrap generated was either used in their manufacturing activity or sold without payment of duty. The original authority confirmed the demand for duty, interest, and penalty for the period in question. The Commissioner (Appeals) upheld this decision, leading to the current appeal.

The appellants argued that the scrap generated during manufacturing is inevitable and not the intended final product, therefore not subject to excise duty. They cited legal precedents, including a decision by the Honorable Supreme Court, which held that waste and scrap generated during the manufacturing process are not exigible to excise duty. The appellants also pointed out that the appellate authority made a mistake in considering the issue related to BHEL, as it was not raised in the show cause notice.

After hearing both sides, the Tribunal referred to the decision of the Honorable Bombay High Court in a similar case, where it was held that scrap generated during manufacturing is not liable for excise duty. This decision was upheld by the Honorable Supreme Court. Therefore, the Tribunal set aside the demand for duty, concluding that the scrap generated during the manufacturing process is not subject to excise duty. The appeal was allowed with consequential relief, if any, as per law.