2018 (5) TMI 2021 - AT - Central Excise

Tribunal rules in favor of appellants on Central Excise duty liability for waste and scrap

M/s Tata Steel Ltd., M/s BMW Industries Ltd., M/s Tata Ryerson Ltd. Versus Commr. of Central Excise & Service Tax, Jamshedpur

The Tribunal allowed all appeals filed by the appellants against duty liability, penalty, and interest under the Central Excise Act. It was determined ... Levy of Central Excise Duty - waste and scrap generated out of cutting and slitting of CR/HR coils by EPAs as per specification to their buyers - HELD THAT:- During the course of production, waste and scrap generated out of cutting and slitting of CR/HR coils, returned to M/s Tata Steel Ltd. as per agreed price. It has been held in the case of Faridabad Iron & Steel Traders Association [2003 (11) TMI 107 - HIGH COURT OF DELHI] that cutting and slitting of CR/HR coils, does not amount to manufacture. The ratio laid down in this judgement was accepted by the CBEC and accordingly,Board’s Circular No.584/21/2001-CX dated 07.09.2001 was set aside. In the said Circular, it was held that cutting of HR/CR Coils of iron of non-alloy steel into sheets or slitting into strips of lesser width or slitting of sheets into strips will amount to manufacture if the resultant product is classifiable under different sub-heading of the Central Excise Tariff. Subsequently, CBEC withdrew the Circular in 2005 by issue of Circular dated 2nd March, 2005, wherein it has been clarified that the activity of cutting and slitting of HR/CR Coils into required length do not amount to manufacture of Excisable goods within the meaning of Central Excise Act. The question of charging Central Excise duty on the waste and scrap emerging out cutting/slitting of HR/CR Coils is not sustainable - Appeal allowed - decided in favor of appellant. Issues:1. Duty liability against the appellants under the Central Excise Act, 1944 along with penalty and applicable interest.2. Whether cutting and slitting of CR/HR Coils into required length and width amounts to manufacture of excisable goods.3. Alleged short payment of Central Excise duty on waste and scrap generated during processing.4. Applicability of Rule 8 of the Central Excise Valuation Rules on valuation of waste and scrap.5. Dispute related to the period from June 2003 to June 2005.6. Imposition of penalty under Section 11AC of the Act and Rule 25 of the Central Excise Rules.Analysis:1. The appellants filed appeals against the Order-in-Original holding duty liability, penalty, and interest under the Central Excise Act. The issue revolved around whether cutting and slitting of CR/HR Coils by job workers amounted to manufacturing excisable goods. The Department alleged short payment of duty on waste and scrap generated during processing. The dispute spanned from June 2003 to June 2005.2. The Tribunal considered the case law precedent and circulars issued by the CBEC. It was established that cutting and slitting of CR/HR Coils did not amount to manufacturing excisable goods. Circulars clarified that this activity did not constitute manufacture. As a result, the emergence of waste and scrap from this process was not subject to Central Excise duty. The Tribunal allowed all appeals based on this interpretation.3. The appellants argued that duty payment on waste and scrap was based on values declared by Tata Steel in accordance with Rule 8 of the Valuation Rules. They contended that since the activity did not amount to manufacture, duty on waste and scrap was not required. The Tribunal agreed, citing relevant case laws and Circulars withdrawing the earlier stance on the issue.4. The Department claimed that Tata Steel realized more from auctioning waste and scrap, suggesting this amount should be considered for Central Excise duty payment. However, the Tribunal's analysis focused on the fundamental question of whether the cutting and slitting process constituted manufacture, concluding that duty on waste and scrap was not sustainable.5. The Tribunal's decision rested on the interpretation that cutting and slitting of CR/HR Coils did not amount to manufacturing excisable goods. This conclusion was supported by the withdrawal of earlier Circulars and relevant case law, leading to the allowance of all appeals.6. The Tribunal's ruling invalidated the duty liability on waste and scrap generated during the cutting and slitting process, emphasizing that since this activity did not constitute manufacturing, Central Excise duty on waste and scrap was not justified. The appeals were allowed based on this interpretation, highlighting the importance of the CBEC Circulars and case law in determining the non-leviability of duty on such waste and scrap.