Duty on waste and scrap from used capital goods fails where no specific charging provision exists under the governing rules.

Duty on waste and scrap arising from old and used capital goods could not be sustained for the disputed period because the governing Cenvat Credit Rules did not contain a specific charging provision authorising such levy. Rule 3(4) dealt with removal of inputs or capital goods as such, but did not extend to waste and scrap generated from used capital goods, and the earlier pre-1-4-2000 framework had a different specific provision. In the absence of an express rule covering the period in issue, the duty demand and penalty were held unsustainable and set aside in favour of the assessee.

---

---

Issues: Whether duty could be demanded on waste and scrap arising out of old and used capital goods under Rule 3(4) read with Rule 12 of the Cenvat Credit Rules, 2002 in the absence of a specific charging provision applicable to the period in dispute.

Analysis: The applicable framework prior to 1-4-2000 contained a specific provision for duty on waste and scrap of capital goods on which credit had been taken. For the period in dispute, no corresponding provision existed. Rule 3(4) of the Cenvat Credit Rules, 2002 covered removal of inputs or capital goods as such, but did not extend to waste and scrap arising from used capital goods. In the absence of a specific rule authorising such levy, duty could not be sustained.

Conclusion: The demand of duty and the penalty were not sustainable and were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded and the impugned demand and penalty did not survive.

Ratio Decidendi: A duty demand on waste and scrap of capital goods cannot be sustained for a period when the governing rules do not contain a specific provision authorising such levy.

---