2017 (2) TMI 978 - AT - Central Excise

Waste and scrap - removal without payment of duty - conveyor belts - credit of duty paid on conveyor belt was taken by the appellants. When the conveyor belt after repeated use became unfit for further use, these worn out conveyor belts were sold as waste and scrap by the appellants - whether duty is required to be paid on the waste and scrap of Conveyor belts on which the credit was taken by the appellants as capital goods? - Held that - U/r 57S (2)(C) when the capital goods are sold as waste and scrap the manufacture shall pay the duty leviable on such waste and scrap - Therefore Revenue is rightly demanding duty on such waste and scrap. Extended period of limitation - public sector undertaking - whether the demand raised by invocation of limitation period has to be upheld as held by the Ld. Member (Technical) or the appeal has to be allowed on the point of limitation as held by the Id. Member (Judicial)? - Held that - the appellants did not file due declaration u/r 173B for manufacture, classification and clearance of such waste and scrap and also did not indicate said clearance in their RT-12 monthly returns. I find that the question of filing declaration or indicating in the monthly return regarding sale of waste and scrap of conveyor belts would not arise in view of bonafide belief entertained by the appellant as could be deduced from different interpretations followed by the Tribunal itself. There could be no substance in the allegation of fraud, suppression, wilful misstatement with an intention to evade payment of duty against the appellant in such a situation. The appellant is liable to pay Central Excise duty on waste and scrap of conveyor belts sold and cleared by them - the demand shall be restricted to normal period - decided partly in favor of the appellant.

Issues Involved:
1. Whether duty is required to be paid on the waste and scrap of conveyor belts on which credit was taken by the appellants as capital goods.
2. Classification of the waste and scrap of worn-out conveyor belts.
3. Applicability of extended period of limitation for the demand of duty.
4. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Duty on Waste and Scrap of Conveyor Belts:
The appellants, engaged in manufacturing iron and steel products, availed Modvat/Cenvat credit on conveyor belts used as capital goods. After repeated use, these belts were sold as waste and scrap without payment of Central Excise duty. The Revenue demanded duty on these clearances under Rule 57S(2)(c) of the Central Excise Rules, 1944, which mandates payment of duty on capital goods sold as waste and scrap. The Tribunal upheld the Revenue's demand, stating that the appellants were rightly required to pay duty on such waste and scrap, as per the rule.

2. Classification of Waste and Scrap:
The appellants argued that the waste and scrap of conveyor belts do not fall under Chapter Heading 4004 of the Central Excise Tariff, which pertains to waste, parings, and scrap of rubber. They contended that the belts, originally classified under Heading 84.28, did not undergo any processing like cutting or slitting to be classified under Heading 4004. The Tribunal, however, referred to the HSN Explanatory Notes and concluded that goods of rubber not usable due to wear or other reasons fall under Heading 4004. Thus, the waste and scrap of worn-out conveyor belts were classified under Heading 4004.

3. Extended Period of Limitation:
The Show Cause Notice was issued on 16.10.2001 for the period from September 1996 to March 2001, invoking the extended period of limitation. The appellants argued that they had a bona fide belief that duty was not payable and had not suppressed any facts. The Member (Judicial) opined that mere non-disclosure without mala fide intent does not justify the invocation of the extended period. However, the Member (Technical) upheld the invocation of the extended period, citing suppression of facts due to the non-filing of classification declarations and non-mentioning in RT-12 returns. The Third Member concluded that the extended period could not be invoked due to the absence of mala fide intent, and the demand should be restricted to the normal period.

4. Imposition of Penalty:
The Commissioner imposed an equal amount of penalty under Section 11AC of the Act, which was upheld by the Member (Technical) due to the established suppression of facts. However, the Member (Judicial) argued that the absence of mala fide intent negates the grounds for penalty. The Third Member's decision to restrict the demand to the normal period implies a reconsideration of the penalty imposition aligned with the absence of mala fide intent.

Final Judgment:
The Tribunal, by majority decision, held that the appellants are liable to pay duty on the waste and scrap of conveyor belts but restricted the demand to the normal period, thereby negating the extended period and associated penalties.

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