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Issues: (i) whether duty was payable on waste and scrap of capital goods under Rule 57S(2)(c) of the Central Excise Rules; (ii) whether penalty equal to the duty amount was sustainable.
Issue (i): whether duty was payable on waste and scrap of capital goods under Rule 57S(2)(c) of the Central Excise Rules.
Analysis: The scrap was admitted to arise from capital goods on which credit had been taken, and it consisted of mixed scrap from various capital goods. In those circumstances, the cited precedent dealing with burnt copper wire was held inapplicable. The Tribunal concluded that the liability under Rule 57S(2)(c) was attracted.
Conclusion: Duty demand on the scrap was upheld against the assessee.
Issue (ii): whether penalty equal to the duty amount was sustainable.
Analysis: The scrap had been cleared under invoices and the relevant invoices were already submitted to the Revenue. On those facts, suppression or misdeclaration was not made out, and the basis for imposing penalty was found wanting.
Conclusion: Penalty was set aside in favour of the assessee.
Final Conclusion: The demand on the scrap was sustained, but the penal consequence was deleted, resulting in only a partial success for the assessee.
Ratio Decidendi: Where scrap arises from capital goods on which credit has been availed and the scrap is a mixed scrap of such goods, duty can be demanded under Rule 57S(2)(c), but penalty cannot be sustained absent suppression or misdeclaration.
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