2003 (9) TMI 437 - AT - Central Excise

Tribunal upholds duty demand on waste/scrap, overturns penalty, grants relief

The Tribunal upheld the duty demand on waste and scrap cleared by the steel manufacturer before the compound levy scheme introduction but accepted the ... Waste and scrap - Exemption - Valuation Issues:1. Duty demand and penalty imposed on the appellant for clearance of waste and scrap produced before the introduction of compound levy scheme.2. Appellant's contention regarding the understanding of waste and scrap clearance under the compound levy scheme.3. Computation of duty and valuation principles applied.4. Applicability of exemption under Notification No. 49/97 to waste and scrap generated before the changeover to compound levy scheme.5. Justification of penalty imposition based on the intention to evade duty.Analysis:1. The appellant, a manufacturer of steel bars and rods, faced duty demand and penalty for clearing waste and scrap produced before the implementation of the compound levy scheme under Chapter 72 of the Central Excise Tariff. The lower authorities imposed a duty demand of over Rs. 1.5 lakhs and a penalty of Rs. 10,000 on the appellant for this clearance without duty payment.2. The appellant argued that they believed waste and scrap in stock after transitioning to the compound levy scheme would remain covered by the scheme. They contended that the non-duty paid clearance was due to this understanding and not an intentional evasion of duty. They also highlighted errors in the duty computation, where the entire sale amount of waste and scrap was treated as assessable value instead of cum-duty, contrary to legal precedent.3. The learned SDR opposed the appellant's claim, stating that the exemption under Notification No. 49/97 did not apply to the scrap in question, as it pertained to waste and scrap generated within units operating under the compound levy scheme. The duty demand for waste and scrap produced before the scheme changeover was deemed valid.4. Upon reviewing the submissions and records, the Tribunal acknowledged the correctness of the duty demand for waste and scrap produced pre-scheme transition. However, the appellant's valuation method was deemed acceptable, aligning with established valuation principles. The Tribunal also agreed with the appellant's argument regarding the penalty, considering the confusion over legal provisions and lack of intent to evade duty.5. Consequently, the Tribunal directed the Deputy Commissioner to recalculate the duty amount by treating the realized price as cum-duty and provide appropriate relief to the appellant. The imposed penalty was set aside, confirming the impugned order with the mentioned modifications, thereby disposing of the appeal.