2024 (1) TMI 770 - AT - Central Excise

Process amounting to manufacture - marketable commodity - case of Department is that scraps so cleared appeared to be generated out of a process - HELD THAT - The Commissioner (Appeals) clearly held that the process of segregation of various scraps would not amount to manufacture under section 2(f) of the Central Excise Act and as the respondent had not availed CENVAT credit on such scrap, no duty liability would arise on clearance of such scrap. This finding is based on decisions of the Supreme Court in M/S. SATNAM OVERSEAS LTD. VERSUS COMMNR. OF CENTRAL EXCISE, NEW DELHI 2015 (4) TMI 356 - SUPREME COURT and also M/S. SERVO-MED INDUSTRIES PVT. LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI 2015 (5) TMI 292 - SUPREME COURT . The findings recorded by the Commissioner (Appeals) do not suffer from perversity. Appeal dismissed.

Summary

Issues:
The issues involved in the judgment are the confirmation of demand of central excise duty with interest and penalty, the process of segregation of various scraps not amounting to manufacture under section 2(f) of the Central Excise Act, and the appeal against setting aside the order passed by the Additional Commissioner.

Confirmation of Demand of Central Excise Duty:
The respondent, engaged in the manufacture of lead ingot and lead rods, was found to have cleared extracted items like PVC, plastic, hard rubber, iron, copper, aluminium, and brass without payment of duty. A show cause notice was issued, and despite the respondent denying the allegations, the Additional Commissioner confirmed the demand of excise duty. The Commissioner (Appeals) allowed the respondent's appeal, citing that the process of segregation of scraps did not amount to manufacture under the Central Excise Act. The Commissioner held that since the respondent had not availed CENVAT credit on such scrap, no duty liability would arise on clearance of such scrap. The decision was supported by legal precedents such as Union of India v JG. Glass and Satnam Overseas v. CCE, New Delhi.

Process of Segregation Not Amounting to Manufacture:
The Commissioner (Appeals) emphasized that the process of segregation of various kinds of scraps from non-dutiable scrap did not satisfy the definition of 'manufacture' as per Section 2(f) of the Central Excise Act, 1944. It was noted that the scrap remained sellable even without segregation and that the purpose of segregation was to recover desired inputs, making the process not incidental or auxiliary to the manufacture of final products like lead ingots or lead rods. The Commissioner highlighted that the duty liability did not arise as the appellant had not availed CENVAT credit on the segregated scrap. The decision was further supported by the case law references provided in the judgment.

Appeal Against Setting Aside the Order:
The department appealed against the order passed by the Commissioner (Appeals), arguing that the Additional Commissioner had validly confirmed the levy of excise duty. However, the Tribunal dismissed the appeal, upholding the Commissioner's findings that the process of segregation of scraps did not amount to manufacture under the Central Excise Act. The Tribunal found no perversity in the Commissioner's decision and relied on legal precedents to support the dismissal of the appeal.