2013 (7) TMI 53 - HC - Central Excise

Levy of duty on Scrap - Due to mechanical working metal scrap were generated out of scrapping of the capital goods (Machinery and components) - Held that - when the scrap had not arisen out of manufacture, but arising on account of wear and tear in the absence of specific provision for such waste and scrap in the relevant rules, duty could not be demanded - Decided against the revenue.

Summary

Issues:
1. Whether the impugned goods arose from any process of manufacture?
2. Whether reliance on note 8(a) of the Central Excise Tariff Act was correct?

Analysis:

Issue 1:
The case involved an appeal by the Revenue against an order of the Customs, Excise and Service Tax Appellate Tribunal regarding the clearance of metal scrap by the assessee without payment of duty. The Revenue contended that the scrap generated from worn-out capital goods attracted duty at the time of clearance. The Assistant Commissioner issued a show cause notice, alleging that the scrap fell under a specific sub-heading of the Central Excise Tariff Act. The First Appellate Authority, however, noted that during the relevant period, there was no provision for demanding duty on waste and scrap of capital goods. The Authority held that since the scrap did not arise from manufacture but from wear and tear, duty could not be demanded. The CESTAT upheld this view, leading to the dismissal of the Revenue's appeal.

Issue 2:
The Revenue argued that a specific rule introduced in 2005 was relevant to the case, but the Court found that the rule was not applicable to the period in question (2003-04). Additionally, the Revenue contended that the scrap attracted duty due to mechanical working of metals, as per a section of the Central Excise Tariff Act. However, the Court observed that the scrap in question arose from worn-out parts of capital goods used in sugar and molasses production, not from manufacturing activities. The CESTAT also noted that the Revenue failed to establish that the assessee manufactured iron and steel goods or components. Ultimately, the Court affirmed the CESTAT's decision, rejecting the Revenue's contentions and dismissing the appeal.

In conclusion, the Court upheld the decision of the CESTAT, emphasizing that the scrap in question did not arise from manufacturing processes but from the wear and tear of capital goods. The Court found no grounds to interfere with the Tribunal's order, leading to the dismissal of the Civil Miscellaneous Appeal filed by the Revenue.