2000 (7) TMI 371 - AT - Central Excise

Summary

Issues:
Interpretation of Rule 57F(1) and Rule 57F(5) of the Central Excise Rules, 1944 regarding the applicability of duty on waste and scrap of glass bottles. Validity of duty demand and penalty imposed under Rule 173Q. Admissibility of Modvat credit on glass bottles used as inputs.

Analysis:
The dispute in this case revolves around whether Rule 57F(1) or Rule 57F(5) of the Central Excise Rules, 1944 is applicable to the situation at hand. The appellants, engaged in manufacturing aerated waters, were utilizing Modvat credit for duty paid on glass bottles used as inputs. The Commissioner confirmed a duty demand and imposed a penalty under Rule 173Q for not paying duty on clearances of glass bottles sold and waste glass bottles from 1-4-1992 to 19-10-1995. The issue raised was whether the Modvat credit taken on damaged glass bottles during the manufacturing process needed to be reversed. The appellants argued that Rule 57F(1) was not attracted as there was no removal of inputs for home consumption or export, and no sale or transfer took place. However, the Department contended that Rule 57F(5) applied to waste arising from processing inputs, requiring payment of duty. The Department's position was supported by the deeming provision that waste was manufactured in the factory, justifying duty imposition.

The Departmental Representative highlighted that the appellants failed to follow procedures for declaring waste and scrap of glass bottles and did not submit a Classification List for bottle removal. The Commissioner considered whether the appellants were obligated to pay duty under Rule 57F(5) for waste glass bottles cleared during the specified period. It was established that the appellants sold waste glass bottles and, having availed Modvat credit, Rule 57F(5) was applicable, necessitating duty payment on the waste. The Department argued that the duty demand was based on Rule 57F(5) and not Rule 57F(1)(ii) due to the leasing arrangement for the bottles. The Tribunal found no legal flaw in invoking Rule 57F(1)(ii) and upheld the duty demand and penalty, concluding that the appellants were liable for not paying Central Excise duty on the Modvat credit utilized.

In the analysis of case laws cited by both parties, it was determined that the decisions did not directly address the specific issue of whether Rule 57F(5) applied to waste generated during processing of duty-paid inputs. The Tribunal noted the absence of a Classification List for the removed items, reinforcing the applicability of Rule 57F(5) in the case. Ultimately, the Tribunal upheld the impugned order, dismissing the appeal and affirming the duty demand and penalty imposed on the appellants for their failure to pay Central Excise duty on Modvat credit utilized for glass bottles.