2005 (11) TMI 138 - AT - Central Excise

Interest and penalty - Demand - Cenvat/Modvat - Dutiability - Waste and scrap of capital goods

Summary

Issues:
1. Excisability of waste and scrap of capital goods
2. Applicability of Rule 57S(c)(2) for duty payment on waste and scrap
3. Imposition of penalty under Section 11AC and Rule 173Q
4. Discharge of duty demands prior to Show Cause Notice issuance
5. Recovery of credit availed under Rules 57S(2) and 57F
6. Burden of proof on the Department regarding scrap arising from capital goods
7. Levy of duty on waste/scrap generated from sources other than raw material
8. Recovery of duty on packaging material of input
9. Validity of penalty under Rule 173Q(1)
10. Barred proceedings under Central Excise Rules, 1944
11. Applicability of Cenvat Credit Rules, 2000/2001

Analysis:
1. The Appellate Tribunal addressed the issue of excisability of waste and scrap of capital goods. The CCE (A) found the appellants' argument that such waste and scrap are not excisable to be untenable, citing Rule 57S(c)(2) requiring duty payment on them. The Tribunal differentiated the case law cited by the appellants, emphasizing that the present issue concerns capital goods sold as waste and scrap, distinct from dismantling waste. Lack of documentary evidence led to the consideration of wire and cable scrap as waste of capital goods, liable for excise duty.

2. The Tribunal examined the imposition of penalties under Section 11AC and Rule 173Q. It noted that penalties and interest cannot be upheld if duty demands are discharged before the Show Cause Notice issuance, aligning with established legal precedent. The Tribunal also critiqued the application of Rules 57S(2) and 57F for duty recovery, emphasizing the need for credit recovery under Modvat Rules as per judicial decisions.

3. Regarding the burden of proof on the Department for scrap arising from capital goods, the Tribunal rejected the onus cast on the assessee without cogent evidence. It highlighted the necessity for the Department to substantiate claims with concrete proof, discrediting demands based on presumptions.

4. The Tribunal analyzed the issue of levy of duty on waste/scrap from sources other than raw material, emphasizing the requirement of skilled manipulation for excise duty imposition. It cited a Supreme Court ruling to support its decision, clarifying that waste/scrap not arising from skilled manipulation is not subject to duty under the Central Excise Act, 1944.

5. The Tribunal also addressed the recovery of duty on packaging material of input and the applicability of Cenvat Credit Rules, 2000/2001, emphasizing the need for specific provisions for duty demand on waste and scrap of capital goods. It set aside the penalties, interest, and duty demands, concluding the appeal in favor of the appellants.