1995 (8) TMI 122 - AT - Central Excise

Issues Involved:
1. Classification of goods as waste and scrap.
2. Applicability of Central Excise duty.
3. Limitation period for demand of duty.
4. Imposition of penalty.

Issue-wise Detailed Analysis:

1. Classification of Goods as Waste and Scrap:
The appellants, M/s. Siemens Limited, were engaged in the manufacture of switch boards, panels, and parts thereof. They utilized duty-paid inputs like iron and steel CR sheets, aluminum, and copper bars, and availed Modvat credit. The remnants after manufacturing were cleared as waste and scrap. The Collector of Central Excise found that these remnants were useable as products and did not meet the definition of waste and scrap as per Section Note 6 of Section XV of the Central Excise Tariff Act, 1985. The Tribunal emphasized that waste and scrap are generally understood as materials not serviceable and used primarily for remelting. The goods in question were marketable and useable without remelting, thus not fitting the definition of waste and scrap.

2. Applicability of Central Excise Duty:
The Tribunal held that under Rule 57A, the credit of specified duty is allowable if the duty-paid inputs are used in or in relation to the manufacture of the final product. The remnants sold as waste and scrap did not meet this criterion as they were marketable commodities. Therefore, the duty applicable to waste and scrap was lower than the Modvat credit already availed. The Tribunal referenced several decisions, including TISCO v. CCE and Bajaj Auto Ltd. v. CCE, to support that goods which are useable as such cannot be classified as waste and scrap and must be subjected to duty applicable to their usable form.

3. Limitation Period for Demand of Duty:
The appellants argued that the demand was time-barred. The show cause notice was dated 27-2-1991 for the period from 1-3-1986 to 31-12-1990. The Tribunal clarified that the issue was not about taking credit at the stage of receipt of inputs but about the disposal of inputs not in the manner specified in the Modvat Scheme. Under sub-rule (2) of Rule 57-I, there is no time limit for demanding duty when inputs are disposed of in an unspecified manner. The Tribunal concluded that the demand was within the extended period of limitation under the proviso to Section 11A(1) read with Rule 57-I of the Central Excise Rules.

4. Imposition of Penalty:
The Collector had imposed a penalty of Rs. 25,000/- on the appellants. The Tribunal, considering the issues involved, set aside the penalty amount. It was noted that the appellants had contested the whole demand and the adjudicating authority had confirmed the demand barring damaged sheets which were packing materials. The Tribunal directed the adjudicating authority to reconsider the matter regarding shearings and trimmings which could be considered as waste in the manufacture process, in light of the Supreme Court's observations in Union of India v. Indian Aluminium Company Ltd.

Conclusion:
The Tribunal found no merit in the appeal regarding the demand of Central Excise duty, except for the relief discussed concerning shearings and trimmings. The penalty imposed was set aside, and the appeal was otherwise rejected. The adjudicating authority was directed to extend relief for shearings and trimmings, if applicable.

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