2016 (3) TMI 520 - AT - Central Excise

Liability to pay duty on clearance of structural scrap - duty demand alleging suppression of facts - Held that - Scrap arising out of working on the structural/steel procured by the appellant assessee for construction/fabrication of refinery. The said scrap cannot be considered as arising during the course of manufacturing activity within the factory premises of the appellant. Appellant was not engaged in the manufacturing of iron and steel, in order to hold that the scrap generated would be liable to duty. This view is fortified by the judgement of the Tribunal in the case of Zuari Cement Ltd (2006 (10) TMI 342 - CESTAT, BANGALORE ), Apollo Tyres Ltd (2004 (9) TMI 548 - CESTAT, NEW DELHI ) and Hindalco Industries Ltd (2001 (12) TMI 120 - CEGAT, NEW DELHI ). There is no dispute as to the fact that the said waste and scrap which is generated, as indicated herein above is generated during the fabrication of the refinery in the factory premises of the appellant. In our considered view this kind of waste and scrap as indicated hereinabove cannot be dutiable in the hands of appellant as waste and scrap arising out of the manufacturing activity.- Decided in favour of assessee Clearance of waste and scrap of inputs and capital goods, rejected/damaged inputs and capital goods - reversal of CENVAT credit - Held that - As seen from the reproduced specimen list that the said items which are cleared by the appellant are scraps arising during the course of manufacturing, replacement, repair or reconditioning of the various machineries, pipes, fittings etc. in the refinery. The finding recorded by the adjudicating authority is that the said items are inputs as such, seems to be mis-construed inasmuch as the description itself indicates that the said items are nothing but scrap or damaged goods which cannot by any stretch of imagination be considered as clearance of inputs or capital goods as such. When there is no clearance of inputs or capital goods as such, question of reversal of CENVAT credit availed on such items does not arise. See Grasim Industries Ltd. (2011 (10) TMI 2 - SUPREME COURT OF INDIA ) - Decided in favour of assessee Clearance of the inputs as such - Held that - As seen from the records that the appellant had cleared various inputs without payment of duty. He has admitted and deposited partly some amount for the clearance of inputs as such. In view of the foregoing we are of the considered view that appellant has not made out any case in respect of the allegation at this Pointand demand of the duty on the said point is liable to be upheld along with interest. - Decided against assessee Invoking extended period of limitation - Held that - We do agree with the learned counsel for the appellant assessee that the appellant being a Public Sector Undertaking could not have had any malafide intention for non-payment of duty liability if any, on various scrap generated in their factory premises, more so when all the removals have been recorded in the books maintained by them - Decided in favour of assessee

Summary

Issues:
1) Liability to pay duty on clearance of structural scrap
2) Clearance of waste and scrap of inputs and capital goods
3) Clearance of inputs as such

Analysis:

1) Liability to pay duty on clearance of structural scrap:
The appeals involved a challenge against the confirmation of demand for central excise duty and interest on the clearance of scrap without payment of duty. The appellant argued that the scrap generated during the fabrication of structures in the refinery, which were cleared without payment of duty, should not be considered liable to duty. The Tribunal agreed with the appellant, citing precedents such as Zuari Cement Ltd, Apollo Tyres Ltd, and Hindalco Industries Ltd. The Tribunal concluded that the scrap arising from the fabrication process in the factory premises cannot be considered dutiable under manufacturing activity.

2) Clearance of waste and scrap of inputs and capital goods:
The Tribunal examined the clearance of waste and scrap of inputs and capital goods, rejected or damaged items, during the manufacturing, replacement, repair, or reconditioning of machinery in the refinery. It was found that these items were not inputs or capital goods as such, and therefore, the demand for duty on these items was deemed unsustainable. The Tribunal referred to judgments like Grasim Industries Ltd and CEAT Ltd to support this decision.

3) Clearance of inputs as such:
Regarding the clearance of inputs without payment of duty, the Tribunal upheld the demand for duty along with interest. The appellant had cleared various inputs without payment, and the Tribunal found no merit in the appellant's case against this allegation.

Limitation Issue:
The Tribunal agreed with the appellant that being a Public Sector Undertaking, there was no malafide intention for non-payment of duty on the scrap generated. Citing judgments like CCE Chennai I Vs Chennai Petroleum Corpn Ltd, the Tribunal held in favor of the appellant on the limitation issue, leading to the success of the appeal on this ground.

Penalties:
Since the appeal was disposed of in favor of the appellant on merits and limitation, the Revenue's appeal for imposing penalties was not considered further.

Conclusion:
The Tribunal found the impugned order unsustainable concerning the liability to pay duty on certain clearances, while upholding the demand for duty on other clearances. The appeals were disposed of accordingly, and the stay petition filed by the appellant was also disposed of.