2002 (11) TMI 213 - AT - Central Excise

Summary

Issues: Appeal against demand of duty and penalty for scrap generated during manufacture of exempted goods.

In this case, M/s. E.P. Electro Processing (P) Ltd. filed an appeal against the demand of duty and penalty confirmed by the Commissioner (Appeals) for scrap generated during the manufacture of exempted goods. The appellant argued that they manufacture both dutiable and exempted goods in separate portions of their factory and should be eligible for exemption from duty on the scrap generated during the manufacture of exempted goods. They also claimed the right to take Modvat credit if duty is held payable. The appellant further argued against the imposition of penalty, citing a previous Tribunal decision in their favor. On the other hand, the Department argued that the proviso to the relevant notification applies as the appellant manufactures both dutiable and exempted products in the same factory, making them ineligible for exemption and Modvat credit on the duty paid on inputs for exempted products.

The Tribunal considered the arguments from both sides and referred to a previous decision in the appellant's own case where it was held that the benefit of exemption notification is not admissible if waste or scrap is cleared from a factory where both excisable and exempted goods are manufactured. Relying on this precedent, the Tribunal upheld that the appellant is not eligible for the benefit of the exemption notification and also not entitled to Modvat credit on duty paid on inputs for exempted products. The penalty imposed on the appellant was set aside based on the circumstances of the case and the previous order. Consequently, the appeal was partly allowed, affirming the decision on duty and Modvat credit while setting aside the penalty.

In conclusion, the Tribunal's decision clarified that manufacturing both dutiable and exempted goods in the same factory makes the appellant ineligible for exemption from duty on scrap generated during the manufacture of exempted goods. Additionally, the appellant was not granted Modvat credit on duty paid on inputs for exempted products. However, the penalty imposed on the appellant was set aside in line with the previous Tribunal decision and the circumstances of the case.