2018 (1) TMI 47 - AT - Central Excise

Clandestine removal - It is the case of the department that the assessee removed clandestinely aluminium scrap and plastic scrap during the period 1991-92 to 1995-96 either under delivery challan or without delivery challan - whether the appellants have cleared the aluminium scrap which was alleged by the revenue and whether the plastic scrap cleared by the appellants is liable to duty? - Held that - As regards aluminium scrap we find that the only scrap which was cleared out of factory is those scrap for which the challans were issued. The remaining quantity was used in the manufacture of final product as a packing material. During the course of manufacture of plastic vessel tank the aluminium was used as a mould. After manufacture of such vessel tank, such aluminium gets scrapped and therefore that scrap material was used for the purpose of packing of final product which was cleared on payment of duty. The aluminium used as a mould for manufacture of plastic vessel tank and subsequently used for packing of final product, it is clearly covered by N/N. 217/86, hence no duty can be demanded on such scrap. As regards the aluminium scrap shown to have been cleared as per the challans same alone is liable for duty. The matter is remanded to the adjudicating authority only for requantification of demand - appeal allowed by way of remand.

Summary

Issues involved:
Claim of full exemption/nil rate of duty under various notifications, Alleged clandestine removal of aluminium and plastic scrap, Interpretation of relevant notifications, Compliance with conditions for exemption, Requantification of duty demand.

Analysis:
The case involved the appellants engaged in manufacturing products falling under specific classifications of the Central Excise Tariff Act and claiming exemption under different notifications. The Department alleged clandestine removal of aluminium and plastic scrap during a certain period. The dispute centered around the clearance of aluminium scrap and the liability of duty on plastic scrap. The Commissioner (Appeals) had allowed the respondent's appeal, leading to the revenue filing an appeal before the Tribunal.

The revenue argued that the appellants had cleared aluminium scrap without paying duty, citing previous Tribunal orders regarding the classification of products and exemption notifications. The revenue contended that the appellants did not comply with the conditions for availing exemption on aluminium scrap clearance, thus making them liable to pay duty. On the other hand, the respondent argued that the duty paid on exempted goods reversed the modvat credit, fulfilling the exemption notification's conditions. Additionally, they claimed that the remaining aluminium scrap was used as packing material for the final product, which was exempted under a different notification.

After considering both sides' submissions and examining the records, the Tribunal focused on determining whether the appellants had indeed cleared the aluminium and plastic scrap. Regarding the aluminium scrap, the Tribunal found that only the scrap cleared with challans was liable for duty, while the remaining quantity used as packing material for the final product was exempted under a specific notification. Therefore, duty recalculations were necessary only for the scrap shown in the challans. As for the plastic scrap, the Tribunal concluded that it fell under an exemption notification, rendering the demand on plastic scrap unsustainable.

The Tribunal remanded the matter to the adjudicating authority for the requantification of the demand based on the above findings. The appeal was disposed of through remand for further proceedings.