2004 (7) TMI 159 - AT - Central Excise

Summary

Issues:
Demand of excise duty on scrap generated in Sugar Mills during machinery repair and classification as metal workshop scrap.

Analysis:
(A) The issue pertains to the demand of excise duty on scrap produced in Sugar Mills while repairing damaged machinery, which was classified and sold as metal workshop scrap. The Range Superintendent directed the payment of duty amounting to Rs. 82,878. Subsequently, a notice was issued on 9-9-98, leading to penalties and confirmation of the paid duty. The CCE (Appeals) reduced the penalty, prompting this appeal.

(B) The crucial aspect is whether the waste and scrap resulting from workshop repairs and machinery reconditioning can be considered as arising from the processing of raw material, such as sugar cane in this case. Referring to the decision in the case of U.O.I. v. M/s. Ahmedabad Electricity Co Ltd., 2003 (158) E.L.T. 3 (S.C.), it was established that the manufacturing process involves deliberate skilled manipulation of inputs or raw materials to create a new article, which was not the case with scrap. Consequently, the duty demands and penalties upheld by the Commissioner (Appeals) cannot be justified for scrap emerging from repairs in the Sugar Mill workshop.

(C) The Tribunal distinguished the decision in Budhawal Co-op. Sugar Mills Ltd., 2002 (141) E.L.T. 490 (T), which considered such scrap as dutiable. The Tribunal noted that the Budhawal decision was rendered before the Supreme Court's ruling in the Ahmedabad Electricity Co. Ltd. case, which set the test for levying duty on scrap. Instead, the Tribunal aligned with the decisions in Hindalco Industries Ltd. case 2002 (144) E.L.T. 339 and Diesel Components Works - 2000 (120) E.L.T. 648, where similar scrap was deemed non-dutiable. Consequently, the order was set aside, and the appeal was allowed.