2017 (11) TMI 1000 - AT - Central Excise

Waste and scrap of the capital goods - Rule 3 (5A) of CCR, 2004 - duty demanded at flat rate without classifying items and without determining rate of duty leviable - Held that - identical issue decided in the case of SHRIRAM ALKALI & CHEMICALS Versus COMMISSIONER OF C. EX., SURAT 2010 (8) TMI 274 - CESTAT, AHMEDABAD , where it was held that waste and scrap are not covered by the definition and in any case department has not made any effort to classify the same, it has to be held that appellants have made out a very strong case in their favor - As the issue has already been settled that without classifying the waste and scrap, duty cannot be demanded from the appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of duty on waste and scrap of capital goods under Rule 3 (5A) of CCR, 2004 without proper classification.

Analysis:
The appellant, a manufacturer of Sugar and Molasses, faced a demand for duty on waste and scrap of capital goods under Rule 3 (5A) of CCR, 2004. The show cause notice was issued due to the clearance of waste and scrap without payment of duty. The matter was adjudicated, and duty along with interest and penalty was imposed. The appellant contended that duty cannot be demanded without proper classification, citing the decision in the case of Shree Ganesh Khand Udyog Sahakari Mandli Ltd. Vs. CCE, Surat and Shriram Alkali & Chemicals Vs. CCE, Surat. The Revenue argued that duty is required to be paid on waste and scrap of capital goods under Rule 3 (5) of Cenvat Credit Rules, 2004.

The Tribunal examined the issue and referred to previous judgments. In the case of Shree Ganesh Khand Udyog Sahakari Mandli Ltd., it was observed that waste and scrap must be classified for duty determination. The Tribunal emphasized the necessity of classifying goods under Rule 3(5A) of Cenvat Credit Rules before demanding duty. The Tribunal also considered the definition of waste and scrap under CETA 1985, noting that scrap from capital goods may not fall under this definition. The decision highlighted the importance of classifying waste and scrap before imposing duty.

Based on the settled principle that duty cannot be demanded without proper classification of waste and scrap, the impugned order was set aside. It was held that duty cannot be demanded from the appellant without classifying the waste and scrap of the capital goods. Consequently, the appeal was allowed with any consequential relief.

This detailed analysis of the judgment showcases the importance of proper classification in demanding duty on waste and scrap of capital goods under relevant rules and regulations, as highlighted in the legal proceedings before the Appellate Tribunal CESTAT AHMEDABAD.