Duty on scrap from used capital goods requires clear legal authority; later notification could not apply retrospectively.

For the period before an express provision equivalent to Rule 57-S of the Central Excise Rules, 1944, duty could not be demanded on waste and scrap arising from long-used capital goods merely because the scrap was marketable and classifiable as excisable goods. Liability did not arise where the assessee was not the manufacturer of the waste and scrap and no rule or other authority of law required duty payment on its clearance. A later notification referred to in the text did not apply to the period in dispute, so the duty demand was held unsustainable.

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Issues: Whether duty could be demanded on waste and scrap arising from long-used capital goods cleared during the period prior to the introduction of the relevant notification, in the absence of a specific rule requiring reversal of credit or payment of duty on such clearance.

Analysis: The relevant period was before the introduction of an express provision corresponding to Rule 57-S of the Central Excise Rules, 1944. The fact that waste and scrap is marketable and classifiable as excisable goods did not, by itself, create liability in the hands of the assessee when the assessee was not the manufacturer of the waste and scrap and there was no authority of law requiring payment of duty on clearance of such scrap from capital goods. The later notification referred to by the Tribunal was not applicable to the period in dispute.

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

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