2004 (10) TMI 250 - AT - Central Excise

Summary

Issues:
1. Whether the assessee was required to reverse the credit taken when rejected goods were received back into the factory and cleared as scrap instead of paying duty on scrap.
2. Whether the rejected wire was subjected to further processing before being cleared as scrap.
3. Whether the Revenue's claim regarding debiting an amount equal to the credit availed in respect of scrap clearances is valid.

Analysis:
Issue 1: The respondents manufactured Iron and Steel wires, some of which were rejected by buyers and brought back to the factory. The Commissioner (Appeals) set aside the order of the lower authority, stating that the rejected goods were subjected to further processing before being cleared as scrap. The original authority held that the assessee should have reversed the credit taken when the rejected goods were received back into the factory. However, it was found that the rejected wire was indeed processed further before being cleared as scrap, and the assessee paid duty on the scrap based on its value. The Tribunal concluded that the Revenue's plea did not stand on merits, as the differential duty worked out by the Revenue was not tenable.

Issue 2: The Tribunal noted that the rejected wire was indeed subjected to further processing before being cleared as scrap. The show cause notice annexure indicated that the rejected wire was processed further, contrary to the Revenue's claim that the wire was not processed and cleared as such. The Tribunal emphasized that what was ultimately cleared from the factory was scrap resulting from the processing of rejected wire, and the assessee was not required to reverse the credit taken when the rejected wire was received back into the factory.

Issue 3: The Revenue argued that the assessee should have debited an amount equal to the credit availed in respect of scrap clearances as per Rule 57 F3(a). The Revenue contended that what was cleared as scrap was the input on which credit was taken by the assessee. However, the Tribunal found that the rejected wire was processed further before being cleared as scrap, and the duty was paid on the scrap based on its value. Therefore, the Tribunal rejected the Revenue's appeal on this ground as well.

In conclusion, the Tribunal rejected the Revenue's appeals in both cases, emphasizing that the rejected goods were processed further before being cleared as scrap, and the duty was paid on the scrap based on its value.