Whether duty liability arise on waste and scrap when further used as such?

PJ/CASE LAW/2016-17/3092

Case:-MAN STRUCTURAL PVT. LTD. Versus COMMISSIONER OF C. EX., JAIPUR-I

Citation:- 2016 (331) E.L.T. 460 (Tri. - Del.)

Brief facts:- Appellant is in appeal against the impugned order demanding duty on scrap and waste generated during the course of fabrication of factory shed.
The facts of this case are that the appellant procured angle, channels, etc., which were used by them for fabrication of factory shed which was embedded to earth and while fabrication of this factory shed, some waste and scrap was generated which was ultimately used by the appellant for fabrication of trolley line in their factory. Revenue is of the view that the appellant is required to pay duty on waste and scrap generated during fabrication of factory shed in their factory. Consequently, impugned proceedings were initiated against the appellant and converted into impugned demand. Aggrieved from the said orders, the appellant is before them.

Appellant’s contention:- Ld. counsel for the appellant submits that these waste and scrap have been further used by the appellant captively for fabrication of trolley line. Therefore, as per Section Note 8 to Section 15 of Central Excise Tariff Act, the impugned scrap does not fall under waste and scrap as waste and scrap defines the waste and scrap which is not usable as such. He submits that as it is a fact on record that these waste and scrap have been captively used by the appellant. Therefore, it does not qualify as waste and scrap as defined in Section Note 8 to Section Note 15 of Central Excise Tariff Act and they are not required to pay duty thereon. He, further submits that the ld. Commissioner (Appeals) held that the trolley line which has been manufactured by the appellant falls under Chapter 72 of Central Excise Tariff Act, 1985. Therefore, the trolley line is not capital goods. Consequently, they are not required to pay duty on waste and scrap which has been used by them for fabrication of trolley line.

Respondent’s contention:- On the other hand, ld. AR reiterated the findings of the Commissioner in the impugned order.

Reasoning of Judgment:-In this case, duty has been demanded on waste and scrap generated during the course of fabrication of factory shed which was ultimately used for fabrication of trolley line. Therefore, the metal which has been used for fabrication of trolley line cannot be defined as waste and scrap as per Section Note 8 to Section 15 of Central Excise Tariff Act, 1985 which defined as under :

In this section, the following expressions have the meanings hereby assigned to them :
(a) Waste and scrap
Metal waste and scrap from the manufacture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons.

As by plain reading of the said section note, it is clear that the metal which becomes non-usable as such waste and scrap admittedly in this matter, the waste and scrap has been used for fabrication of trolley line cannot be the said unusable waste and scrap as such. Therefore, the appellant is not liable to pay duty thereon. Further, the trolley line cannot be classified under Chapter 72 of Central Excise Tariff Act, 1985. Therefore, the waste and scrap in question is not liable for payment of duty. In these circumstances, they set aside the impugned order and allow the appeal with consequential relief, if any.

Decision: Appeal allowed

Comment:- The analogy of the case is that Revenue is seeking duty on remnants of angles and channels of iron and steel generated during fabrication of factory shed terming these as waste and scrap. Such remnants are used further by appellant for fabrication of Trolley Line in factory. According section Note 8 to Section 15 of Central Excise Tariff Act, 1985, “waste and scrap” is the item which can’t be usable.
In the instant case remnants has been used for fabrication of trolley line therefore it cannot be treated as “waste and Scrap” in view of Section 15 of Central Excise Tariff Act. Therefore, the appellant is not liable to pay duty thereon. Further, the trolley line cannot be classified under Chapter 72 of Central Excise Tariff Act, 1985. Therefore, the waste and scrap is not liable for payment of duty.

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PJ/CASE LAW/2016-17/3092

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