Court upholds Tribunal decision: scrap cleared without duty payment not liable for duty

The Court dismissed the appeal by the Revenue against the Tribunal's order, which held that scrap cleared without duty payment was not liable for duty as it was not considered inputs or capital goods but rather scraps arising from repair activities. The Court referred to precedents and the Apex Court's decision in Grasim Industries Ltd., clarifying that such scraps do not contribute to the manufacturing process of the end product. Therefore, the Court found no legal question to consider and upheld the Tribunal's decision, dismissing the appeals.

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Issues:
- Appeal against Tribunal's order regarding duty liability on cleared scrap
- Interpretation of whether cleared items are scrap or inputs

Analysis:
The appellant, Revenue, appealed against the Tribunal's order claiming that scrap cleared without duty payment was liable for duty, raising questions of law. The Tribunal observed that the cleared items were scraps arising during manufacturing, repair, or reconditioning, not inputs or capital goods. The Tribunal cited precedents like Grasim Industries Ltd. and held that demands confirmed under this point were not sustainable. The appellant argued that if scrap resulted from the manufacturing process, duty should be levied. However, the Court noted that the issue was settled by the Apex Court in Grasim Industries Ltd. case, where it was clarified that items like scrap arising from repair activities are not considered as raw materials in the manufacturing process of the end product.

The Court referred to the Apex Court's observation that items like M.S. scrap and Iron scrap, arising from repair activities, do not contribute to the manufacturing process of the end product. The repairing activity does not constitute a part of the manufacturing activity for the production of the end product. Therefore, such scraps cannot be considered as by-products of the final product but rather by-products of the repairing process. Considering the items listed in the impugned order, all were scraps from repairs, especially in the context of the assessee's Petroleum Refinery manufacturing activity.

Since the issue was already settled by the Apex Court in Grasim Industries Ltd., the Court found no question of law requiring consideration. Consequently, the appeals were dismissed.

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