2010 (1) TMI 356 - AT - Central Excise

Scrap- Appellants are using sheets for manufacturing electrical stampings in the course of which scrap is generated. The appellants have been denied exemption in respect of such scrap leading to Appeal No. E/293/03. They have also been denied consequential refund. Held that- the appellants shall be eligible for consequential refund of the duty paid by them subsequently on such scrap. However, since the duty amount has been paid by utilizing Cenvat credit, they would be entitled to refund of duty through Cenvat credit route. Both the appeals are allowed in the above terms.

Summary

Issues:
1. Denial of exemption in respect of scrap used in manufacturing electrical stampings.
2. Denial of consequential refund of duty paid on scrap.

Analysis:
The Appellate Tribunal CESTAT, CHENNAI, comprising Ms. Jyoti Balasundaram, Vice-President, and Dr. Chittaranjan Satapathy, Member (T), heard the case where the appellants were using sheets to manufacture electrical stampings, generating scrap in the process. The scrap was utilized for making castings, some of which were cleared on duty payment, while the rest were used for submersible pump manufacturing. The denial of exemption for the scrap led to Appeal No. E/293/03, and the denial of consequential refund led to Appeal No. E/446/09.

Upon deliberation, the Tribunal found that goods falling under Chapter 72, used in manufacturing submersible pumps, were exempt under Notification Nos. 8/96, 4/97, & 5/98 during relevant periods. Consequently, the scrap utilized in manufacturing submersible pumps was eligible for exemption under these notifications. Additionally, the scrap used for making castings sold outside on duty payment was eligible for captive consumption exemption under Notification No. 67/95. Therefore, the Tribunal held the entire quantity of scrap as eligible for exemption, setting aside the duty demand.

Furthermore, the Tribunal ruled that the appellants were entitled to a consequential refund of the duty paid on the scrap. As the duty amount was paid using Cenvat credit, the refund would be processed through the Cenvat credit route. Consequently, both appeals were allowed in favor of the appellants.

In conclusion, the Tribunal's decision favored the appellants, granting exemption for the scrap used in manufacturing submersible pumps and ordering a refund of duty paid on the scrap through the Cenvat credit route.