2017 (12) TMI 1307 - AT - Central Excise

Remission of duty - Rule 21 of the CER, 2002 - defective PSC sleepers - Held that - It is not the case of the Revenue that the appellants had removed the defective PSC sleepers in as it is condition out of the factory, without payment of Central Excise duty - since the appellants entered the entire manufacturing particulars in the RG-1 register, the demand cannot be fastened on the sole ground that the procedures laid down in Rule 21 of the Rules have not been followed by the appellants. Since, the defective PSC sleepers, in question, were not removed from the factory, and were sold as waste scrap on payment of appropriate duty, the duty demand confirmed in the impugned orders cannot be sustained for recovery. Appeal allowed - decided in favor of appellant.

Issues Involved:
- Alleged removal of defective PSC sleepers without payment of Central Excise duty
- Compliance with Rule 21 of the Central Excise Rules, 2002
- Determination of marketability of PSC sleepers by Indian Railways
- Applicability of duty demand and penalties imposed by the Department

Analysis:

1. Alleged removal of defective PSC sleepers without payment of Central Excise duty:
The Central Excise Department alleged that the appellants removed defective PSC sleepers clandestinely without paying Central Excise duty. However, the Adjudicating Authority found that the appellants did not remove the defective sleepers without payment of duty. The Authority noted that the appellants sold the defective sleepers as scrap, paying the appropriate Central Excise duty on the same. Therefore, the duty demand based on the alleged removal of defective sleepers without payment of duty was not upheld.

2. Compliance with Rule 21 of the Central Excise Rules, 2002:
The Department contended that the appellants did not follow the procedures prescribed under Rule 21 of the Central Excise Rules, 2002 for remission of duty on defective goods. However, the Adjudicating Authority observed that since the defective PSC sleepers were not removed from the factory and were sold as scrap after paying the required duty, the demand for non-compliance with Rule 21 was not justified.

3. Determination of marketability of PSC sleepers by Indian Railways:
The Ld. Advocate for the appellants argued that the PSC sleepers manufactured by the appellants attained marketability only when found fit for use by Indian Railways. The Adjudicating Authority concurred with this argument, stating that the concrete sleepers supplied to Indian Railways were tested by the Railway agency. The Authority noted that the broken sleepers were dutiable only when they were marketable and removed from the factory. Therefore, the marketability of the sleepers by Indian Railways was crucial in determining the duty liability.

4. Applicability of duty demand and penalties imposed by the Department:
The Department had initiated show cause notice proceedings seeking confirmation of duty demand against the appellants, which was confirmed by the Ld. Commissioner (Appeals) along with the imposition of penalties. However, the Tribunal found that since the defective PSC sleepers were not removed from the factory and were sold as scrap after payment of duty, the duty demand and penalties imposed were not sustainable. Consequently, the Tribunal allowed the appeals in favor of the appellants, setting aside the impugned orders.

In conclusion, the Tribunal ruled in favor of the appellants, emphasizing that the duty demand and penalties were not justified due to the proper payment of Central Excise duty on defective PSC sleepers sold as scrap and the marketability of the sleepers determined by Indian Railways.

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