2015 (2) TMI 226 - AT - Central Excise

Demand of duty in respect of removal of used and old conveyor belts - whether the used and old conveyor belts removed by the appellant as waste and scrap, are required to discharge its duty liability in terms of the provisions of Rule 57S(2)(C)-Where capital goods are sold as waste and scrap - Held that - old and used rubber goods would fall under Chapter 40 only when they are converted into waste and scrap before their removal. Merely on account of repeated use, old and used conveyor belts would not be shifted to Chapter 40, from their maiden classification under Chapter 84. The fact that no processing was undertaken on the conveyor belts at the time of their clearances, is clear from the allegations made in the show-cause notice. - The Notice treat broken and worn out conveyor belts as waste and scrap which are sold by them in the market without payment of Central Excise duty. As such, it is clear from the above that the conveyor belts are cleared as used and worn out conveyor belts without converting the same into waste and scrap. A specific contention stands taken by the learned advocate that the appellant might treat the said old and used conveyor belts as waste for them but the same may be used by the buyers, after some reprocessing etc. as conveyor belts only, in which case it cannot be held that it is waste and scrap falling under Chapter 40. - provisions of Rule 57S(2)(C) of the CENVAT Credit Rules are not attracted in the present case inasmuch as the goods cleared by the appellant are not leviable to duty of excise. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Rule 57S(2)(C) regarding the duty liability on waste and scrap.
2. Classification of used conveyor belts under Central Excise Tariff headings.
3. Application of previous legal precedents in similar cases.

Analysis:

Issue 1: Interpretation of Rule 57S(2)(C)
The Tribunal initially allowed the appellant's appeal, but on Revenue's appeal, the order was set aside and remanded. There was a difference of opinion between the Member(Technical) and Member(Judicial) on the point of limitation. The Hon'ble President advised both Members to decide on the merits and limitation. The dispute revolved around whether used conveyor belts sold as waste and scrap attract duty liability under Rule 57S(2)(C). The rule mandates duty payment on waste and scrap of capital goods sold. Legal references to Gujarat High Court and Supreme Court judgments were made to establish the duty liability.

Issue 2: Classification of used conveyor belts
The appellant argued that the conveyor belts, even after repeated use, do not attract excise duty as they are not converted into waste and scrap. Revenue contended that the goods fall under Chapter 40 of the Central Excise Tariff as waste and scrap of rubber. The appellant maintained that the conveyor belts should be classified under heading 84.28 as material handling equipment, not waste. Legal interpretations of HSN Explanatory notes and previous Tribunal decisions were cited to support the appellant's stance.

Issue 3: Application of legal precedents
The judgment referenced the Supreme Court's decision on waste arising from plant maintenance and the Tribunal's ruling on the non-dutiability of old used material. The Tribunal's decision in the Mysore Cements Ltd. case, upheld by the High Court of Karnataka, was analyzed. The judgment highlighted the distinction between waste and scrap conversion and the classification of goods under specific tariff headings. The analogy of a broken wooden chair illustrated the principle that goods cleared for further use should retain their original classification.

In conclusion, the Tribunal ruled in favor of the appellant, holding that Rule 57S(2)(C) did not apply as the goods cleared were not liable for excise duty. The judgment emphasized the importance of classification based on the actual use and condition of the goods, rejecting the Revenue's argument for duty under Chapter 40. The decision provided a detailed legal analysis and interpretation of relevant rules and precedents to arrive at a well-reasoned conclusion.