Capital goods removed without use fall under the no-use duty rule, and penalty survives under the saving clause.

Capital goods cleared without being installed or used were treated under Rule 57S(2)(a) of the Central Excise Rules, 1944, because the decisive factor was the actual manner of removal, not the description of the goods as waste and scrap. Clause (c) applied only to goods that had genuinely become waste and scrap after use, so the duty demand equal to the credit taken was upheld against the assessee. On penalty, Section 38A of the Central Excise Act, 1944 preserved liabilities and penalties already incurred under the earlier regime, and the wrongful removal was punishable under that law; the penalty was therefore sustained.

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Issues: (i) Whether capital goods cleared without installation or use, though described as waste and scrap, attracted duty under Rule 57S(2)(a) of the Central Excise Rules, 1944 or only duty on waste and scrap under Rule 57S(2)(c); (ii) Whether penalty was sustainable in view of Section 38A of the Central Excise Act, 1944.

Issue (i): Whether capital goods cleared without installation or use, though described as waste and scrap, attracted duty under Rule 57S(2)(a) of the Central Excise Rules, 1944 or only duty on waste and scrap under Rule 57S(2)(c).

Analysis: The decisive factor was the actual manner of removal. Rule 57S(2) separately dealt with three situations: removal without use, removal after use, and sale as waste and scrap. Where capital goods were removed without being used, clause (a) applied and the duty could not be less than the credit taken. Clause (c) governed only goods that had become waste and scrap in the relevant sense, not goods never put to use but merely described as scrap on clearance. The authorities relied on by the appellant were held distinguishable on facts.

Conclusion: The clearance fell under Rule 57S(2)(a), and the duty demand equal to the credit taken was upheld, against the assessee.

Issue (ii): Whether penalty was sustainable in view of Section 38A of the Central Excise Act, 1944.

Analysis: Section 38A preserved liabilities and penalties incurred under the earlier rules. The wrongful availment and removal of capital goods without use was already punishable under the erstwhile regime, so the saving provision did not exempt the appellant from penalty. The cases cited on retrospective penalty were found inapplicable because they involved different factual and legal settings.

Conclusion: The penalty was held to be rightly imposed, against the assessee.

Final Conclusion: The impugned order was sustained in full, and the appeal failed on both duty liability and penalty.

Ratio Decidendi: Where capital goods are removed without being put to use, their clearance is governed by the specific provision for removal without use and not by the provision applicable to bona fide waste and scrap, and the saving clause does not bar penalty if the misconduct was already punishable under the earlier law.

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