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TMI Blog2006 (11) TMI 124X X X X Extracts X X X X X X X X Extracts X X X X ..... ALIA and GOPAL KRISHAN VYAS,JJ [Order].- Heard learned counsel for the parties. 2. This appeal is directed against the order of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi dated 7.5.2004. The following questions of law have been framed for consideration at the time of admission : "1. Whether the Tribunal was justified in facts and circumstances of the case to conclude that gun-metal scrap was not metal scrap out of capital goods on which modvat credit was paid ? 2. Whether in case no modvat credit is availed, the respondents were still liable to pay excise duty on sale of gun metal scrap under Sub-heading 8002.20 of the Central Excise Tariff Act, 1985 as held by the Commissioner ?" 3. The facts leading to this case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial characteristics like tensile strength, temperature tolerance, pressure withstandability, etc. it becomes scrap and that scrap is cleared by them without payment of duty as its essential characteristic is lost and no more can be called as gun metal. About the conveyor belting/rubber, the same stand was taken that due to repeated use, it becomes useless. In view of the aforesaid, it was contended that waste and scrap has not arisen out of manufacturing process as scrap of inputs and was not excisable goods at all. For the applicability of Rule 57 AB (2) (b) and 57S (2) ©, it was urged that these capital goods have themselves been removed and sold as capital goods and not otherwise. About the conveyor belt, it was very old having installe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old and secondly that unless the machine itself was sold as a scrap or waste on which the modvat credit was availed by the assessee, which was the capital goods on which modvat credit was availed, therefore, the provisions of Rules 57 AB (2) (b) and 57S (2) (c) had no application. 8. Having perused the Scheme of Rules 57S and 57AB and the Tarrif Items, we find that there has been misconception about the levy of excise duty on scrap of capital goods independent of provisions of Rule 57S/57AB. 9. The show cause notice was clearly in respect of removing scrap from the site in respect of which modvat credit has been availed. The reason is not far to seek. The assessee does not manufacture capital goods, therefore, the capital goods used in ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Keeping in view that the machinery items were installed in the factory much before modvat credit scheme came into existence. Therefore, the first condition about levy of excise duty on the sale of waste and scrap of capital goods in terms of Rule 57AB (2) (b) or 57S (2) (C) did not exist and hence the Tribunal was justified in not sustaining the levy of excise duty on gun metal scrap. 12. The second reason is also in consonance with the provisions of Rule 57S (2) (c) and 57AB (2) (b). The condition in either case is that capital goods itself has been sold as scrap. There is no dispute that shaft bush the capital goods on which modvat credit was availed has not become scrap and was not sold by the assessee. Apparently, the provisions of Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X
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