Central excise duty on waste and scrap was confined to capital goods removed as scrap while Rule 57-S(2)(c) remained in force.

Duty under Rule 57-S(2)(c) of the Central Excise Rules, 1944 could be levied only on capital goods removed as waste and scrap while that provision remained in force. After 01.04.2000, the provision stood deleted, so no demand could be sustained for scrap generated thereafter. Scrap arising from repair, maintenance or replacement of capital goods, or from packing materials, was not treated as removal of capital goods as waste and scrap. The demand was therefore unsustainable on both grounds, and the finding favoured the assessee.

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Issues: Whether duty could be demanded on waste and scrap arising after 01.04.2000 under Rule 57-S(2)(c) of the Central Excise Rules, 1944; and whether scrap arising from repair, maintenance or replacement of capital goods was covered by that provision.

Analysis: Rule 57-S(2)(c) was deleted from the statute with effect from 01.04.2000, so no demand could be sustained for the period after that date. For the earlier period, the provision applied only where capital goods themselves were removed as waste and scrap. Scrap arising during repair, maintenance or replacement of machinery, or from packing materials, did not amount to removal of capital goods as waste and scrap. The demand was therefore founded on an premise, and the appellate order could not be sustained.

Conclusion: The demand was not sustainable either for the period after 01.04.2000 or for scrap arising from repair and maintenance of capital goods. The finding was in favour of the assessee.

Final Conclusion: The appeal succeeded and the order of the original adjudicating authority was restored.

Ratio Decidendi: Duty under Rule 57-S(2)(c) could be levied only on capital goods removed as waste and scrap while the provision remained in force, and not on scrap arising from repair, maintenance or replacement of capital goods.

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