Duty on waste and scrap from duty-paid inputs was unsustainable; Rule 57D protected the clearances.

Waste and scrap of corrugated boxes arising from duty-paid inputs used in manufacture was not liable to duty merely because it was cleared as scrap. The exemption notification issue did not arise where no independent duty liability existed, and the assessee's consistent classification practice supported the claimed benefit. The appellate authority was also correct that such waste and scrap fell within Rule 57D. On these facts, the demand of duty and penalty was held unsustainable and the Revenue challenge failed.

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Issues: Whether duty was payable on waste and scrap of corrugated boxes cleared by the assessee and whether the demand was sustainable in view of the exemption notification and Rule 57D.

Analysis: The assessee was not manufacturing corrugated boxes or waste and scrap of corrugated boxes as a final product. The disputed material was scrap arising from duty-paid inputs used in manufacture. On these facts, there was no liability to pay duty on clearance of such waste and scrap, and the question of denial of benefit under the exemption notification did not arise. The assessee had also obtained approval of the classification claiming the notification benefit, and the practice had been followed consistently. The appellate authority was further correct in holding that the waste and scrap was covered by Rule 57D.

Conclusion: The demand of duty and penalty on the waste and scrap was unsustainable and the Revenue's challenge failed.

Final Conclusion: The order of the appellate authority was upheld and the Revenue appeal stood rejected.

Ratio Decidendi: Waste and scrap arising from duty-paid inputs used in manufacture is not liable to duty merely because it is cleared as scrap, and the exemption question becomes irrelevant where no duty liability otherwise exists; such scrap is also protected by Rule 57D.

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