2017 (3) TMI 1286 - HC - Central Excise

Scrap - levy of duty - whether the scrap which has been cleared without payment of duty was liable for duty? - Held that - the scrap if has resulted in manufacturing process, the duty is leviable - here scrap not resulted from manufacturing activity, no duty leviable - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against Tribunal's order regarding duty liability on cleared scrap
- Interpretation of whether cleared items are scrap or inputs

Analysis:
The appellant, Revenue, appealed against the Tribunal's order claiming that scrap cleared without duty payment was liable for duty, raising questions of law. The Tribunal observed that the cleared items were scraps arising during manufacturing, repair, or reconditioning, not inputs or capital goods. The Tribunal cited precedents like Grasim Industries Ltd. and held that demands confirmed under this point were not sustainable. The appellant argued that if scrap resulted from the manufacturing process, duty should be levied. However, the Court noted that the issue was settled by the Apex Court in Grasim Industries Ltd. case, where it was clarified that items like scrap arising from repair activities are not considered as raw materials in the manufacturing process of the end product.

The Court referred to the Apex Court's observation that items like M.S. scrap and Iron scrap, arising from repair activities, do not contribute to the manufacturing process of the end product. The repairing activity does not constitute a part of the manufacturing activity for the production of the end product. Therefore, such scraps cannot be considered as by-products of the final product but rather by-products of the repairing process. Considering the items listed in the impugned order, all were scraps from repairs, especially in the context of the assessee's Petroleum Refinery manufacturing activity.

Since the issue was already settled by the Apex Court in Grasim Industries Ltd., the Court found no question of law requiring consideration. Consequently, the appeals were dismissed.