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TMI Blog2006 (10) TMI 306X X X X Extracts X X X X X X X X Extracts X X X X ..... r 1960 and over the years certain parts of the machinery became unusable due to wear arid tear, rust, repairs, etc. and such machinery parts were disposed of as scrap during the period 23-3-96 to 6-4-98. Show-cause notice dated 20-10-1998 issued by the department alleged that the above goods removed by M/s. MCSM without payment duly were waste and scrap falling under SH 7204.90 and hence dutiable. It accordingly demanded duty to the extent of Rs. l,56,892.50 by invoking the proviso to Section 11A(1) of the Central Excise Act on the ground of suppression of facts and also proposed to impose penalty on the noticee under Section 11AC of the Act. M/s. MCSM replied by submitting that the above goods had been discarded as worn-out and unusable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osal for imposing Section 11AC penalty for the period prior to 28-9-96 against which the department preferred appeal to the Commissioner (Appeals) and the appellate authority rejected the said appeal. The present Appeal No. 1754/99 is against the decision of the appellate authority with regard to the proposal for imposing penalty on the party under Section 11AC for the period prior to 28-9-96. 3. Heard both sides. Learned counsel for M/s. MCSM relied on the Tribunal's decision in K.M. Sugar Mills Ltd. v. CCE, Allahabad, 2004 (164) E.L.T. 40 (Tri. - Del.), wherein it had been held that the burden was on the Revenue to prove that any waste and scrap had arisen out of capital goods in respect of which Modvat credit had been availed. Learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, etc. and some of the scrap had arisen out of such process, it was submitted by counsel that the department had no such case in their show-cause notice. Finally, learned counsel claimed that, on the facts of the case, the allegation that waste and scrap defined under Section Note 8(a) had been removed by the party from their factory during the period of dispute was not sustainable and hence the entire demand of duty and penalty were liable to be set aside. In the Department s Appeal No. 1754/99, learned counsel submitted that the appeal was only liable to be dismissed in view of the Supreme Court s ruling that no penalty was imposable under Section 11AC for any period prior to 28-9-96, the date on which the provision came into force. 4. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cords and considered the submissions. The substantive allegation in the show-cause notice was as under :- Whereas, it appears that the scrap cleared by the assessee will fall under the category of waste and scrap as defined in the above said section note and hence should have suffered duty @ 15% advalorem under chapter sub-heading 7204.90 of Central Excise Tariff Act, 1985 at the time of clearance from their factory, irrespective of the fact whether such scrap has arisen out of inputs/capital goods on which Modvat credit has been availed or not or for that matter whether such waste and scrap has arisen during the course of manufacture or not. None of the factual requirements for categorizing the subject goods as waste and scrap de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tear of the metal goods-like plant machinery and hence duty was recoverable thereon as waste and scrap . When it came to issue of show-cause notice later, the department avoided pleading the necessary facts and chose to demand duty on the goods on the strength of Section Note 8(a) without pleading the factual requirements. In the circumstances, beyond doubt, the demand of duty raised in the show-cause notice is not sustainable for the simple reason that the goods in question were not shown to be waste and scrap falling under SH 7204.90. The Tribunal s decision in K.M. Sugar Mills (supra) is also in support of the assessee s case. It was held in that case that the burden was on the Revenue to prove that waste and scrap arose out of cap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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