Duty on waste and scrap from capital goods requires proof that credit was actually taken on those capital goods.

Rule 57-S(2)(c) of the Central Excise Rules, 1944 applies only where waste and scrap arise from capital goods on which credit under Rule 57Q had actually been taken. The burden was on the department to prove such availment before demanding duty on the scrap, and the record did not establish credit during the disputed period. On that basis, the demand was held unsustainable and the order confirming duty and penalty was set aside, with consequential relief to the assessee.

---

---

Issues: Whether duty demand on waste and scrap cleared from capital goods was sustainable when the department failed to prove that credit had been taken on the capital goods, so as to attract Rule 57-S(2)(c) of the Central Excise Rules, 1944.

Analysis: Rule 57-S applies only where waste and scrap arise out of capital goods on which credit has been taken under Rule 57Q. The burden lay on the department to establish that such credit had been availed before invoking the provision. The appellants' position that credit on the relevant capital goods was taken only from 18-8-2001 was not refuted by evidence, and the material placed on record indicated that no credit had been taken during the disputed period. In these circumstances, the requirement of co-relating each scrap item with particular purchase invoices was not the correct test, because the real question was whether the scrap arose from capital goods on which credit had in fact been taken.

Conclusion: The demand under Rule 57-S(2)(c) was not sustainable and the finding was in favour of the assessee.

Final Conclusion: The order confirming duty and penalty was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Rule 57-S can be invoked only when the department proves that credit had been taken on the capital goods from which the waste and scrap arose.

---