2016 (8) TMI 234 - AT - Central Excise

Tribunal overturns duty demand on appellant for scrap clearance, emphasizing burden of proof.

The Tribunal set aside the duty demand and penalty imposed on the appellant for allegedly clearing scrap without paying excise duty. The appellant ... Clearance of various item of scrap generated during the course of manufacture of excisable goods. - Held that:- scrap generated during the repair of the capital goods, cannot be said that the capital goods were cleared as waste and scrap. - Not liable to duty - decided against revenue. Issues:- Duty demand on scrap generated during the manufacture of excisable goods without payment of duty- Allegation of contravention of Central Excise Rules- Contention regarding liability to excise duty on scrap generated during repair of capital goods- Interpretation of Rule 57 S (2) (c) of Central Excise Rules- Burden of proof on the appellant regarding the origin of scrap- Comparison with previous judgments on scrap arising during wear and tear of capital goodsAnalysis:1. The appeal was filed against an order setting aside the original order and confirming a duty demand along with a mandatory penalty. The appellant was accused of clearing scrap without paying duty during a specific period, contravening various Central Excise Rules. The show cause notice highlighted the duty demand and penalties, emphasizing the lack of duty payment on scrap generated during the manufacturing process of excisable goods.2. The appellant argued that the scrap in question was generated during repairs of capital goods and, therefore, was not liable to excise duty. Several judgments were cited to support this claim, emphasizing that scrap arising from wear and tear of capital goods is not considered manufactured and, thus, not subject to duty.3. The Revenue representative supported the impugned order, reiterating the allegations against the appellant.4. The Tribunal examined the contentions of both sides and reviewed the records, including the show cause notice. The notice accused the appellant of clearing scrap without duty payment, citing specific rules. However, the Tribunal noted that there was no evidence to prove that the scrap in question originated from capital goods on which the appellant had taken credit.5. The Commissioner's order confirmed the duty demand based on the assumption that the scrap was generated from capital goods on which credit was taken. However, the Tribunal disagreed with this reasoning, stating that the burden of proof lies with the Revenue to establish the origin of the scrap. The appellant's assertion that the scrap was from repairs of capital goods was deemed valid, and previous judgments were cited to support the argument that such scrap is not liable to duty.6. Ultimately, the Tribunal concluded that the demand against the appellant was not sustainable. Therefore, the impugned order was set aside, and the appeal was allowed.This detailed analysis of the judgment showcases the legal intricacies involved in the case, including the interpretation of relevant rules, burden of proof, and comparison with previous legal precedents.