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Issues: Whether central excise duty was payable on scrap generated from fencing materials, jallis, box channels, beams, structural materials and broken angles used in maintenance and other non-manufacturing activities, and whether the Revenue discharged the burden of proving that the scrap arose from modvatable inputs or manufactured goods.
Analysis: The Tribunal found that scrap arising from non-manufacturing materials used for repairs and maintenance was not shown by the Revenue to have originated from manufactured goods or from inputs on which Modvat credit had been taken. The authorities below proceeded without producing material evidence to establish the excisability of the disputed scrap. In such circumstances, the burden remained on the Revenue to prove that duty was demandable on the scrap in question. The Tribunal also held that the omission to reflect clearance of such non-manufacturing scrap in RT-12 returns did not assist the Revenue, since such scrap was not required to be declared in those returns.
Conclusion: The demand of duty on the disputed scrap was unsustainable and was set aside in favour of the assessee.
Final Conclusion: The appeal succeeded on merits, and the impugned demand, penalty and allied consequences could not be sustained.
Ratio Decidendi: Where the Revenue fails to prove that scrap was generated from modvatable inputs or manufactured goods, excise duty cannot be demanded on such scrap; the burden of establishing excisability lies on the Revenue.
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