No duty on surrendered damaged capital goods without an express charging provision for the relevant period.

Duty could not be demanded on damaged capital goods surrendered after use where the machinery was not removed as such and was treated like waste or scrap arising during use or dismantling. The demand was based on Rule 57S(2)(c) of the erstwhile Central Excise Rules, 1944, but that provision was not in force during the relevant financial year. In the absence of an express charging provision covering such clearances or the related insurance claim, the demand had no legal foundation and was not sustainable.

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Issues: Whether duty was payable on the damaged capital goods or the insurance claim received on their surrender during the relevant financial year, and whether the demand could be sustained in the absence of a charging provision.

Analysis: The demand rested on Rule 57S(2)(c) of the erstwhile Central Excise Rules, 1944, but that provision was not in force during the relevant financial year. The damaged machinery was not removed as such; it had been surrendered after damage, and the situation was akin to waste and scrap arising during use or dismantling of capital goods. In the absence of an express provision authorising duty on such waste, scrap, or similar clearances during the material period, the demand could not be sustained.

Conclusion: The duty demand was not sustainable and the issue was decided in favour of the assessee.

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