Waste and scrap emerging from the inputs/capital goods, on which credit has been availed, whether can be cleared without payment of duty ?

PJ/CASE LAW/2015-16/2747

Case:- COMMISSIONER OF C. EX. & S.T. (LTU), MUMBAI Versus AMBUJA CEMENT LTD.

Citation:- 2015 (316) E.L.T. 272 (Tri. - Mumbai)

Brief facts:-The brief facts of the case are that the respondent is engaged in the manufacture of cement clinker and cement. During the course of manufacturing and packing of cement, certain quantity of scrap/waste is generated, i.e. scrap of plastic emerging from PVC belts being used in the machinery, packing scrap emerging during the manufacture of cement, waste and scrap of grinding material and waste lubricating oil and greases. The adjudicating authority has confirmed demand on PP wrapper cleared without payment of duty on the ground that the respondent had purchased PP wrapper bags for packing of the final product, i.e. cement, and alleged that they could not utilize it in or in relation to the manufacture of the final product. Show cause notice was issued to the respondent proposing demand of duty and imposition of penalty. The adjudicating has also confirmed the demand of duty on cable scrap and PVC scrap cleared without payment of duty, which has arisen from the parts of conveyor belt attached with the machine, used as capital goods, as per the provisions of Section 3(5A) of the Cenvat Credit Rules. The adjudicating authority has also confirmed duty on grinding scrap (media balls) cleared without payment of duty on the ground that the grinding media scrap in the factory has arisen from the machine or their parts and as per Section 3(5A) of the Cenvat Credit Rules, duty is payable on grinding scrap on the transactional value. The respondent preferred an appeal before the Commissioner (Appeals) who allowed the appeal following the decision of the Hon’ble Supreme Court in the case of CCE v. West Coast Industrial Gases Ltd. reported in 2003 (155)E.L.T.11 (S.C.) read with Board’s Circular No. 721/37/2003-CX, dated 6-6-2003.

Appellant’s contention:- The learned AR appearing for the Revenue reiterated the findings of the adjudicating authority and submitted that the waste and scrap emerging from the inputs/capital goods, on which credit has been availed, was cleared without payment of duty in contravention of Rule 3(5)/(5A) of the Central Excise Rules.

Respondent’s contention:- The learned counsel for the respondent-assesseesubmitted that the waste and scrap of HDPE bags has not arisen during the manufacturing process and, therefore, there cannot be any duty liability on removal of such waste and scrap. The learned counsel further submitted that the PP wrapper is not used for packing the final product and is an outer packing in which HDPE bags are received and that the cement is packed in HDPE bags. The learned counsel has also submitted that the demand of duty on grinding media balls is also not sustainable and that the grinding media is used in ball mill or grinding mills in the manufacture of cement and is eligible for credit as input. The learned counsel has relied upon the decision of the Hon’ble Supreme Court in the case of CCE v. West Coast Industrial Gases Ltd. reported in 2003 (155)E.L.T.11 (S.C.).

Reasoning of judgement:-It is found that the issue is covered by the decision ofthe Hon’ble Supreme Court in the case of West Coast Industrial Gases Ltd. (supra) read with Board’s Circular No. 721/37/2003-CX., dated 6-6-2003. Following the said decision of the Hon’ble Supreme Court and the circular, the appeal of the Revenue is dismissed.

Decision:- The appeal of the Revenue is dismissed.

Comment:- the analogy of the case is that if the waste and scrap is generated during the course of manufacture and as a result of such activity then it will be liable to excise duty on clearance but if the same has been generated as only parts of capital goods then its clearance won’t attract any duty.

Submitted by:- somya jain

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PJ/CASE LAW/2015-16/2747

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