2005 (1) TMI 301 - AT - Central Excise

Summary

Issues:
Whether Central Excise duty is payable on capital goods cleared as waste & scrap after availing Modvat credit.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi revolved around the issue of Central Excise duty liability on capital goods cleared as waste & scrap after utilizing Modvat credit. The Respondents, a company engaged in manufacturing biscuits, had availed Modvat Credit on duty paid for capital goods used in their production process. The dispute arose when the Additional Commissioner confirmed the duty and imposed a penalty on the waste and scrap of capital goods for which Modvat Credit had been availed. However, the Commissioner (Appeals) overturned the Adjudication Order, stating that the dismantling of capital goods does not constitute manufacturing, and the resulting waste and scrap are not excisable. The Commissioner also referenced a previous decision in the case of J.K. Industries to support this stance.

The learned SDR argued that the duty is indeed payable by the Respondents under Rule 57-S(2)(c) of the Central Excise Rules, which mandates that manufacturers must pay duty on capital goods sold as waste and scrap. The Tribunal concurred with the SDR's position, emphasizing that the rule explicitly states that duty is leviable on such waste and scrap when capital goods are sold in that form. Since the Respondents had previously availed Modvat Credit on the duty paid for the capital goods now being sold as scrap due to continuous use, the Tribunal held that the duty is payable by them. However, the Tribunal noted that this case primarily involved an interpretation of rules rather than deliberate non-compliance, leading to the decision to set aside the penalty imposed by the Original Authority. Consequently, the Tribunal upheld the duty liability on the Respondents but waived the penalty, concluding the appeal on these terms.