2000 (11) TMI 722 - AT - Central Excise

Summary

Issues:
1. Whether waste and scrap arising during the machining of rough forgings in the appellant's factory is exempt from duty under Notification No. 171/88-C.E.

Analysis:

The case involved the confirmation of a duty demand and penalty by the authorities below against the appellant. The appellant, engaged in the manufacture of railway track construction material, availed credit of duty paid on ingots/billets/blooms under Modvat rules. The waste and scrap arising during the machining of rough forgings in the appellant's factory was the central issue. The Revenue denied exemption under Notification No. 171/88-C.E., adding the value of clearances of waste and scrap to determine the aggregate clearances. The question was whether such waste and scrap was exempt from duty under the notification, impacting the calculation of aggregate clearances for the preceding financial year under Notification No. 1/93-C.E.

The Notification No. 171/88-C.E. grants exemption to waste and scrap of iron subject to specific conditions. Condition (i) requires the waste and scrap to have arisen from goods on which duty has been paid, but credit has not been taken under Rule 57A. Condition (ii) does not impose duty paid conditions on the inputs. The appellant argued that since the waste and scrap arose during the machining of rough castings where no duty was paid, Condition (ii) applied, warranting nil duty. However, it was observed that the final products, bearing plates and fish plates, arose from semi-finished raw materials on which duties were levied. The appellant had taken Modvat credit on the raw material and utilized it for the final product. Therefore, Condition (i) applied, which the appellant failed to satisfy. The emergence of intermediate goods did not disqualify the appellant from claiming Modvat credit. The waste and scrap were considered to have arisen during the manufacture of final products, making them chargeable to duty. Consequently, the appellant was not entitled to the benefit of Notification No. 171/88, and the inclusion of the value of clearances of waste and scrap in the aggregate value was upheld under Notification No. 1/93.

In conclusion, the Tribunal upheld the impugned orders, rejecting the appeal. The judgment clarified the application of the notification conditions and the significance of the manufacturing process in determining duty exemptions for waste and scrap.