2005 (8) TMI 263 - AT - Central Excise

Summary

Issues:
Appeal against disallowance of Modvat credit and duty demand for scrap arising from machine repair.

Analysis:
The case involved two appeals against a common order disallowing Modvat credit and confirming duty demand for a specific period. The duty was demanded due to scrap arising from the repair of capital goods in the factory for manufacturing white cement. The Commissioner (Appeals) upheld the duty demand citing the classification of scrap under Chapter 72 of the tariff. However, the Tribunal found this ground legally untenable as the scrap did not arise from manufacturing activity but from wear and tear of machinery. The appellants had not availed any credit for the machinery in question. The Tribunal referenced a similar case to support its decision, emphasizing that no duty could be demanded for scrap not related to manufacturing activity.

The Tribunal concluded that the impugned order disallowing Modvat credit and confirming duty demand could not be sustained. Therefore, the order was set aside for both appellants, and the appeals were allowed with consequential relief as per the law. The judgment highlighted the distinction between scrap arising from manufacturing activity and that from wear and tear of machinery, emphasizing that duty cannot be demanded for the latter scenario. The decision was based on legal principles and precedents established in similar cases, ensuring a fair outcome for the appellants.