Whether used fire bricks and broken asbestos sheets cleared as waste and scrap from the factory are chargeable to duty?

PJ/Case Law/2013-14/1690

Case:-INSULATORS & ELECTRICALS CO. Versus COMMISSIONER OF CENTRAL EXCISE, BHOPAL

Citation:- 2013 (290) E.L.T. 404 (Tri.-Del.)

Brief facts:- The appellant are manufacturer of electrical insulators. In the course of manufacture of electrical insulators among other waste and scrap, the waste in the form of used fire brick and asbestos sheet waste arises. The point of dispute in this case is as to whether used fire brick and broken asbestos sheets cleared as waste and scrap from the factory are chargeable to duty or not? The CCE (Appeals) was of the view that waste and scrap of fire bricks is chargeable to duty under Heading 6901.90 and of asbestos sheets are chargeable to duty under Chapter 6804.20 and on this basis, he upheld the demand of duty on these items under Rule 3(5A) of the Cenvat Credit Rules, 2004 on the ground that capital goods Cenvat credit had been taken in respect of fire bricks and asbestos sheets. Against this order of the Commissioner (Appeals), this appeal has been filed.

Appellant’s Contention:-The Appellant submitted that neither fire brick waste nor as asbestos sheet waste is covered under sub-heading of Central Excise Tariff Act, that the same are not excisable, that during the period of dispute i.e. from 1-10-2001 to 31-3-2003, there was no provision in the Cenvat Credit Rules, that Cenvat credit availed on capital goods cleared from the factory as waste and scrap would attract duty, that such a provision came with effect from 16-5-2005 only while period of dispute is prior to 16-5-2005 and that in view of this, the impugned order is not correct.

Respondent’s Contention:-The respondent reiterated the finding of the Commissioner (Appeals) in the impugned order.

Reasoning of Judgment:- Having considered the submissions made from both sides, we found that while the department seeks to charge duty on the fire brick’s waste under sub-heading 6901.90 and asbestos sheets waste under Heading 6804.20, on going through these headings, we found none of these sub-headings cover waste and scrap. In fact there is no heading in Chapter 69 to cover waste and scrap of ceramic materials and similarly, sub-heading 68.04 also does not cover waste and scrap of asbestos sheets. In view of this, we are of the view that fire brick scrap and asbestos sheets are not excisable. Moreover during the period of dispute there was no provision in the Cenvat Credit Rules, that when Cenvated capital goods are cleared as waste and scrap, an amount of equal to duty on sale price of such waste and scrap would be chargeable to duty. Such provision was intended by inserting Rule 3(5A) with effect from 16-5-2005 while the period of dispute in this case is prior to this date. In view of this, the impugned order is not sustainable. The same is set aside and appeal is allowed.

Decision:- Appeal allowed.

Comment:-The analogy that is drawn from this case is that when the scrap is not mentioned in the Central Excise Tariff Act, 1985 and is not excisable, then the question of leviability of excise duty does not arise. Moreover, the provision of charging excise duty on the clearance of waste and scrap under Rule 3(5A) came into effect from 16.05.2005 and it cannot be implemented retrospectively, for the period prior to its introduction.

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PJ/Case Law/2013-14/1690

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