2006 (2) TMI 58 - HC - Central Excise

Court upholds duty levy on sale of old capital goods as waste & scraps under Rule 57-S(2)(c)

The Court upheld the levy of duty on the sale of old and unusable capital goods sold as waste and scraps under Rule 57-S(2)(c) of the Central Excise ... Dutiability – Appellant contended that on sales of scrap of the capital goods after the capital goods have been used for the purposes of business not liable for duty – Held that appellant liable for duty payment Issues:1. Whether duty of excise is leviable on the sale of old and unusable modvated capital goods sold as waste and scraps under Rule 57-S(2)(c) of the Central Excise Rules, 1944Rs.2. Whether scrap of machineries sold by the appellant is excisableRs.Analysis:Issue 1:The appellant contended that waste and scrap should only be liable to duty if they result from the process of manufacture. The appellant argued that since the capital goods were used in the business for manufacturing fertilizers and the scrap was sold after being used, the provisions of Section 3 of the Central Excise Act, 1944, and Rule 57-S(2)(c) of the Central Excise Rules, 1944, should not apply. However, the Tribunal upheld the levy based on Rule 57-S(2)(c) of the Rules.Issue 2:The Court analyzed Rule 57-S(2)(c) and emphasized that when capital goods are sold as waste and scrap, the manufacturer is obligated to pay the duty on such waste and scrap. It was clarified that the Rule pertains to capital goods used in the manufacturing process, not as final products. The Court rejected the appellant's argument that waste and scrap should only attract duty if generated during the manufacturing process, stating that the appellant does not manufacture capital goods but uses them in the manufacturing process. Consequently, the Court found no infirmity in the Tribunal's order and dismissed the appeal, concluding that no substantial question of law arose in this case.