1995 (1) TMI 198 - AT - Central Excise

Summary

Issues: Interpretation of Notification No. 171/88 for exemption on waste and scrap arising during manufacture of hand tools.

Analysis:
1. The appellant, engaged in manufacturing hand-tools, appealed against the order of the Collector of Central Excise denying exemption under Notification No. 171/88 for waste and scrap arising during production. The Collector contended that the exemption is only applicable when goods are manufactured from duty paid materials, which was not the case here. The appellant argued that the waste and scrap, sent to job workers for conversion into steel bars/flats, should qualify for exemption under Notification No. 214/86. The department issued a show cause notice demanding duty, alleging the waste and scrap did not meet the conditions of Notification No. 171/88.

2. The appellant's advocate argued that the waste and scrap generated during manufacturing is captively used in the production process and qualifies for exemption under Notification No. 214/86. They cited relevant case law and a Ministry of Finance letter to support their position. The respondent contended that the waste and scrap arose from exempted goods and did not meet the conditions for exemption. The Tribunal considered the arguments presented by both sides.

3. The main contention was whether the waste and scrap arising during the manufacturing process should be exempt from duty. The Tribunal analyzed Notification No. 171/88, which requires duty to be paid on the goods for exemption eligibility. The appellant relied on case law to support their interpretation that duty paid at a nil rate should be considered as duty paid. The Tribunal examined the judgments cited by the parties to interpret the relevant provisions of the notifications.

4. The Tribunal referred to the judgments of the Hon'ble Patna High Court and the Supreme Court to determine the meaning of "duty paid" in the context of the notifications. It was observed that if duty was paid on the bars and flats used in manufacturing hand tools, and no credit was taken, then the waste and scrap generated during the process need not attract duty. The Tribunal found that the waste and scrap should be exempt from duty based on the interpretation of the notifications and the legal principles established in the judgments cited.

5. Ultimately, the Tribunal allowed the appeal and set aside the impugned order, ruling in favor of the appellant. The decision was based on the interpretation of the notifications and the application of legal principles established in previous judgments. The Tribunal's analysis focused on the requirement of duty payment on the input materials to determine the exemption eligibility for waste and scrap arising during the manufacturing process.