1992 (9) TMI 180 - AT - Central Excise

Summary

Issues:
1. Duty demand barred by limitation but penalty imposed.
2. Interpretation of Rule 57F(2) and Rule 57F(4) regarding removal of waste and scrap.
3. Applicability of CBEC Circular No. 15/89 in the case.
4. Challenge to the imposition of penalty and duty demand.

Analysis:

Issue 1:
The appeal challenged the Order-in-Original dropping the duty demand as barred by limitation but imposing a penalty of Rs. 25,000 under Rule 173Q of the Central Excise Rules, 1944. The appellants contended that the demand was time-barred and there was no suppression or mis-statement justifying an extended period. The adjudicating authority held the duty payable but dropped the demand due to the limitation issue and imposed the penalty.

Issue 2:
The main issue revolved around the interpretation of Rule 57F(2) and Rule 57F(4) concerning the removal of waste and scrap. The appellants argued that the waste and scrap generated during the manufacturing process were being recycled and re-converted into lead ingots for captive consumption. They followed the procedure under Rule 57F(2) for removal to job-workers for reconversion. The authority viewed waste and scrap as a new dutiable commodity and invoked Rule 57F(4) for duty payment, disagreeing with the appellants' interpretation. However, the Tribunal found that the waste and scrap, not being a new product but remnants of inputs, fell under Rule 57F(2) for reconditioning and reconversion into ingots.

Issue 3:
The appellants cited CBEC Circular No. 15/89, allowing the removal of aluminium scrap for reconversion into ingots under Rule 57F(2), to support their case. They argued that the circular's rationale should apply to lead waste and scrap as well. The Tribunal agreed that the circular's benefit should extend to similarly situated cases unless specific circumstances warrant otherwise, thereby supporting the appellants' position.

Issue 4:
Regarding the challenge to the imposition of penalty and duty demand, the Tribunal ruled in favor of the appellants. Since there was no evasion or intended evasion of duty due to the waste and scrap removal for reconversion into ingots, the penalty was unjustified. The duty demand was also set aside based on the interpretation of Rule 57F(2) and the absence of duty evasion.

In conclusion, the Tribunal allowed the appeal, setting aside the authority's order, and emphasized that no penal liability could be attributed to the appellants due to the absence of duty evasion.