2017 (4) TMI 207 - AT - Central Excise

Tribunal rules in favor of Export Unit in scrap clearance appeals. Non-excisable items.

The Tribunal ruled in favor of the appellant, a 100% Export Oriented Unit, in three appeals regarding the clearance of scrap items into DTA without duty ... 100% Export Oriented Unit (EOU) - clearance of scrap into DTA - central excise duty liability on scrap of dismantled machinery - capital goods credit not availed - imposition of penalty and demand confirmation100% Export Oriented Unit (EOU) - clearance of scrap into DTA - central excise duty liability on scrap of dismantled machinery - capital goods credit not availed - imposition of penalty and demand confirmation - Whether the appellant, as a 100% EOU, was liable to pay Central Excise duty or obtain permission for clearance into DTA of scrap comprising dismantled old and used machinery on which capital goods credit was not availed, and whether the demand and penalty confirmed by lower authorities were sustainable. - HELD THAT: - The Tribunal noted that three show cause notices sought recovery of Central Excise duty and imposition of penalty for alleged unauthorized clearances. The appellant's consistent plea before the authorities was that the goods cleared as scrap were from dismantling of old and used machinery on which no credit as capital goods had been availed. The Tribunal observed no contradiction or adverse finding recorded by the lower authorities on this specific factual claim. The scrap was described as cable scrap, old and used drums and plastic bags, and some items were claimed to have been received prior to grant of EOU status. Applying these facts, the Tribunal held that where capital-goods credit was not availed on the dismantled machinery, there was no basis to sustain a duty demand merely because the appellant had EOU status at a later date. On that determinative factual and legal basis the Tribunal found the confirmed demand and penalty unwarranted and set aside the impugned order without addressing other arguments advanced by the Departmental Representative. [Paras 5, 6]Impugned order set aside; appeals allowed.Final Conclusion: The Tribunal allowed the appeals, holding that scrap from dismantled old machinery on which capital goods credit was not taken did not attract the confirmed Central Excise demand or penalty, and accordingly set aside the orders under challenge. Issues:Whether a 100% Export Oriented Unit could clear items like scrap into DTA without permission and payment of appropriate duty.Analysis:The judgment pertains to three appeals concerning the same assessee and issue, where the appellant, a 100% Export Oriented Unit, cleared scrap items into DTA without permission or payment of duty. The central issue was whether the appellant was liable to pay Central Excise duty on the cleared scrap. Show cause notices were issued to recover duty and impose penalties, which were confirmed by the adjudicating authority and the first appellate authority.Upon review, the Tribunal considered the appellant's argument that the cleared items were scrap from dismantling old machinery, on which no capital goods credit was availed, making them non-excisable. The Tribunal noted that lower authorities did not contradict this argument. It was established that the scrap items were old drums, cable scrap, and plastic bags received before the appellant became an EOU. The Tribunal found no basis for the department to demand duty on these items, given the circumstances. Consequently, the impugned order was set aside, and the appeals were allowed.In conclusion, the Tribunal ruled in favor of the appellant, setting aside the demand for Central Excise duty on the cleared scrap items. The decision was based on the appellant's valid argument regarding the nature of the scrap and the absence of utilization of capital goods credit, making the imposition of duty unwarranted in this case.