Scrap HDPE bags arising during cement packing were not treated as dutiable removal as such under Cenvat credit rules

HDPE bags that became scrap during the packing of cement were treated as not liable to duty as removal as such under Rule 3(5) of the Cenvat Credit Rules, 2004, because the scrap arose in the course of packing and was covered by earlier Tribunal precedent on identical facts. The same reasoning also defeated the consequential penalty under Section 11AC of the Central Excise Act, 1944. The duty demand and penalty were therefore not sustained, and the Revenue's appeal was dismissed.

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Issues: Whether HDPE bags cleared as scrap during the packing of cement were liable to duty as removal as such under Rule 3(5) of the Cenvat Credit Rules, 2004, with consequential penalty under Section 11AC of the Central Excise Act, 1944.

Analysis: The scrap arose during the course of packing of the final product and was covered by earlier Tribunal decisions on the same issue. The claim that such damaged bags were not liable to duty found support in the prior ruling relied upon by the Tribunal, and the controversy was treated as concluded by that line of authority.

Conclusion: The demand of duty and the penalty could not be sustained; the appeal filed by the Revenue was dismissed.

Final Conclusion: Scrap HDPE bags arising during packing of cement were held not to attract the proposed duty liability on the facts of the case, and the assessee's relief was sustained.

Ratio Decidendi: Scrap emerging during the packing process, when covered by binding Tribunal precedent on identical facts, is not liable to be treated as removal as such for duty demand under the cited Cenvat credit regime.

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