2006 (2) TMI 174 - SC - Central Excise

Confiscation and penalty - Waste - whether the scrap lying with the appellant in its factory premises for the purposes of recycling the same would be a waste and, therefore, liable for confiscation and consequential penalty - Held that - Since the adjudicating authority had held the demand beyond the period of limitation and dropped the same, in our view, there was no occasion for the tribunal to go into the question of classification, especially when the Tribunal agreed that the demand created was beyond the period of limitation. Question of classification is left open. There being no finding that the appellant intended to take the scrap outside the factory premises, the confiscation of the scrap which, according to the appellant, was to be recycled, cannot be held to be justified and, consequently, the confiscation of scrap as well as penalty levied cannot be sustained - Decided in favour of assessee

Summary

Issues:
1. Classification of polytubes and other items in the irrigation system.
2. Scrap recycling and liability for confiscation and penalty.

Classification Issue:
The appellant, a manufacturer of irrigation systems, classified polytubes and other items under Heading 8424 of the Central Excise Tariff Act, claiming exemption under Notification No. 46/94-C.E. A show cause notice disputed this classification, proposing duty demand under a different entry. The Commissioner did not decide on classification due to limitation issues. The Tribunal held that polytubes did not fall under Heading 8424 but did not specify an alternative heading. As the demand was time-barred, the Tribunal's classification decision was deemed unnecessary, leaving the question open.

Scrap Recycling Issue:
The appellant faced confiscation and penalty for scrap in its factory premises. The Commissioner upheld confiscation under Rule 173Q of the Central Excise Rules and imposed a penalty. The Tribunal affirmed this decision. However, the Supreme Court found the confiscation unjustified as the scrap was intended for recycling within the premises. Consequently, the Court set aside the Tribunal's order on confiscation and penalty, directing reimbursement of the confiscated amount along with statutory interest to the appellant.

In conclusion, the Supreme Court allowed the appeal, overturning the Tribunal's decision on confiscation and penalty due to the unjustified nature of the confiscation of scrap intended for recycling. The Court emphasized that since the demand was beyond the limitation period, the classification issue was left open. The appellant was directed to be reimbursed the confiscated amount by the revenue along with statutory interest.