2005 (1) TMI 147 - AT - Central Excise

Summary

Issues: Whether duty of Central Excise is payable on capital goods cleared as waste and scrap by a manufacturing company.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the question of whether M/s. J.K. Udaipur Udyog Ltd. was liable to pay Central Excise duty on capital goods cleared by them as waste and scrap. The Respondents, a cement and clinker manufacturer, had availed Modvat credit on the duty paid on capital goods. The Asstt. Commissioner had confirmed the duty and imposed a penalty, which was set aside by the Commissioner (Appeals) on the grounds that the waste and scrap were not generated during the manufacture of the final product but as a result of continuous use of capital goods. The issue revolved around Rule 57S(2) of the Central Excise Rules, 1944, applicable during the relevant period, which stated that when capital goods are sold as waste and scrap, the manufacturer must pay the duty leviable on such waste and scrap.

The Appellate Tribunal noted that the Respondents had indeed availed Modvat credit on the duty paid on the capital goods now being sold as waste and scrap, indicating that these capital goods were used in the manufacturing process. The Tribunal held that the provisions of Rule 57S(2) applied in this case, and the duty was payable on the waste and scrap of the capital goods. The Tribunal disagreed with the Commissioner (Appeals) who had opined that duty is leviable only when the product arises from the process of manufacture. The Tribunal emphasized that availing Modvat credit is subject to compliance with the relevant rules, and a manufacturer cannot benefit from the rules without adhering to the stipulated conditions.

Ultimately, the Tribunal concluded that the Respondents were liable to pay the duty on the waste and scrap of the capital goods but decided that no penalty should be imposed as the issue primarily concerned the interpretation of rules. The appeal was disposed of with the decision that duty was payable on the waste and scrap of the capital goods, but no penalty was to be levied due to the interpretative nature of the issue.