2003 (3) TMI 250 - AT - Central Excise

Summary

Issues Involved:
1. Demand of duty on waste and scrap from capital goods purchased before the introduction of Rule 57S.
2. Demand of duty on waste and scrap from capital goods on which Modvat credit was availed.
3. Whether the demands are barred by time.
4. Imposition of interest and penalty under Sections 11AB and 11AC.

Detailed Analysis:

1. Demand of duty on waste and scrap from capital goods purchased before the introduction of Rule 57S:
The appellants contended that the duty cannot be demanded on waste and scrap arising from capital goods bought before Rule 57S was introduced on 1-3-1994. They asserted that 46 out of their 52 spinning mills were purchased before this date, and thus no Modvat credit was availed on these. The Tribunal agreed, holding that no duty can be demanded on waste and scrap from capital goods on which Modvat credit was not availed. This issue was resolved in favor of the appellants.

2. Demand of duty on waste and scrap from capital goods on which Modvat credit was availed:
The Tribunal examined Rule 57S(2)(c), which mandates that duty be paid on waste and scrap of capital goods on which Modvat credit was availed. The appellants cited various case laws to argue against this, but none addressed Rule 57S directly. The Tribunal concluded that duty is indeed payable on waste and scrap from capital goods on which Modvat credit was availed, ruling in favor of the Revenue on this issue.

3. Whether the demands are barred by time:
The period in question was from October 1994 to July 1998, with the show cause notice issued on 13-8-99. The appellants argued that the demands were time-barred as the conditions for invoking the extended period under the proviso to Section 11A(1) were not met. However, the Tribunal found that since the appellants admitted to clearing waste and scrap from modvated capital goods without informing the department, there was suppression of facts. Thus, the extended period of limitation was applicable, and the demands were not time-barred.

4. Imposition of interest and penalty under Sections 11AB and 11AC:
The Tribunal noted that Sections 11AB and 11AC were introduced on 28-9-1996 and could not be applied retrospectively. The adjudicating authority was directed to reconsider the penalty amount, taking into account the Supreme Court's judgment in State of Madhya Pradesh v. BHEL, which allows for discretion in penalty imposition. Interest under Section 11AB is applicable only on the duty ultimately determined to be payable.

Conclusion:
The Tribunal set aside the impugned order and remanded the matter for re-determination of duty liability on waste and scrap from modvated capital goods, verification of documents, and reconsideration of the quantum of penalty and interest. The appellants were granted the opportunity to present their case with supporting evidence in the de novo proceedings. The appeal was allowed by remand.