1998 (8) TMI 182 - AT - Central Excise

Summary

Issues:
- Whether duty can be demanded on empty drums on which Modvat credit has been utilized?

Analysis:
The appeals in this case revolve around the issue of whether duty can be imposed on empty drums on which Modvat credit has already been utilized. The central question is whether an empty drum should be considered as scrap or a new product. The appellants were accused of manufacturing shell sand and shall moulds & cores, availing Modvat credit for resin used in drums/barrels, and not reversing the credit or paying duty when removing the empty drums. The duty demands and penalties imposed were contested through four appeals, which were consolidated due to the common issue. The advocate representing the appellants argued that the empty drums, not resulting from manufacturing, should not be dutiable as scrap. He cited a similar case where the Tribunal ruled in favor of not paying duty on removed empty drums. On the other hand, the Department reiterated its stance.

The Tribunal considered the arguments and referred to the case law of Castrol India Ltd. The judgment highlighted that for duty to be payable on waste, two conditions must be met: a manufacturing process must occur, and the outcome must be scrap. It was emphasized that merely emptying drums does not constitute manufacturing, as the drums do not transform into a new product. The Tribunal also noted that the issue of whether the drums were waste was not adequately addressed, and no evidence suggested that the drums were no longer usable. Based on this analysis, the Tribunal concluded that duty on empty drums removed from the factory is not required to be paid, aligning with the Castrol India Ltd. judgment. Consequently, the appeals were allowed, and the impugned orders were set aside following the precedent set by the earlier ruling.