Central excise duty on waste, scrap and discarded capital goods was unsustainable before the levy notification took effect.

Waste and scrap were treated as non-excisable goods, so central excise duty could not be sustained on their clearances where the record showed only scrap and waste had been removed. Capital goods cleared as waste were also not liable to duty for the period before 16.5.2005, because Notification No. 27/2005-CE dated 16.5.2005 was the operative provision introducing that levy. On that basis, the duty demand was held unsustainable and the appeal was allowed.

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Issues: Whether waste and scrap, and capital goods cleared as waste prior to 16.5.2005, were liable to central excise duty.

Analysis: The clearances were covered by multiple show cause notices over different periods, and the record did not show any clearance of goods other than scrap and waste. Waste and scrap, not being manufactured excisable goods, did not attract duty. As regards capital goods cleared as waste, duty could not be levied for the period prior to 16.5.2005 because Notification No. 27/2005-CE dated 16.5.2005 was the relevant notification introducing such levy.

Conclusion: The duty demand was unsustainable, and the appeal was allowed.

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