1997 (7) TMI 249 - AT - Central Excise

Summary

Issues: Classification of remnants of silver strips as scrap under sub-heading 7101.80 for duty demand.

Analysis:
The appeal challenged the duty demand of Rs. 1,74,941.78 confirmed by the Collector of Central Excise against the appellants, who are manufacturers of electro-mechanical electronic components. The appellants purchased silver strips containing 90% silver for making precious metal contacts like rotor blades and clips. The process involved punching out components from silver strips, with the remnants returned to the supplier for reprocessing. Initially, under Rule 56C, the remnants were returned without duty payment, as silver strips were dutiable at 12%. However, after Rule 56C was abolished in 1986, the appellants sent remnants for reprocessing without duty payment based on Notification No. 53/86 exempting silver strips from duty. The Show Cause Notice alleged duty evasion on silver strips sent for reprocessing without payment. The appellants argued that the material sent was not scrap but directly convertible to strip form, retaining its market value, and should not be classified as waste or scrap.

The appellants contended that the Collector erred in classifying the remnants as scrap under sub-heading 7101.80, as scrap is typically considered waste with reduced value. They argued that the remnants, though altered in shape by punching, retained their purity and market value when remelted and rerolled into strips. They presented samples to demonstrate the process and emphasized that reclassifying the remnants as scrap would lead to repeated duty payments on the same material until fully consumed. The Departmental Representative supported the Collector's findings.

The Tribunal analyzed the facts and concluded that the remnants of silver strips, altered only in shape by punching, did not lose their intrinsic value or purity. When sent for remelting and rerolling to recreate silver strips, they retained their worth as pieces of silver and were not considered scrap. Therefore, the Tribunal upheld the appellants' contentions, setting aside the impugned order and granting consequential reliefs, allowing the appeal against the duty demand.

In summary, the Tribunal determined that the remnants of silver strips, altered through punching but retaining their purity and market value when remelted and rerolled, could not be classified as scrap under sub-heading 7101.80. Consequently, the duty demand against the appellants was overturned, and the impugned order was set aside with any necessary reliefs granted to the appellants.