2004 (8) TMI 195 - AT - Central Excise

Classification of cut sheets for duty payment clarified by Tribunal and Apex Court

The case involved the classification of cut sheets as waste/scrap or for duty payment. The Tribunal ruled that cut sheets should be treated under Tariff ... Waste and scrap Issues:1. Classification of cut sheets as waste and scrap or sheets for duty payment.2. Applicability of duty rates on off-cuts derived from steel sheets.3. Interpretation of Tariff Entry 72.10 for duty calculation.4. Determination of duty on processed inputs like cut sheets.Analysis:1. The case involved the classification of cut sheets arising during the manufacturing process as waste and scrap or sheets for duty payment. The department alleged that the cut sheets should be cleared on payment of duty applicable under specific Chapter Headings due to their sale at prices higher than market rates. The Commissioner initially dropped the demands and penal action based on a Tribunal judgment stating that metal waste and scrap should be treated as such under the Central Excise Tariff. The Revenue appealed this decision.2. The Tribunal considered previous decisions and the Supreme Court ruling to determine the classification of off-cuts derived from steel sheets. The Supreme Court clarified that although cut steel sheets used in manufacturing ancillary items do not qualify as waste and scrap, they also do not fall under the category of sheets as per the definition in Chapter 72. The off-cuts, having lost their rectangular shape, were classified under Tariff Entry 72.10, attracting a specific duty rate of Rs. 365 per ton. This ruling was supported by various cases like Kirloskar Electric Company Ltd. and Universal Cans and Containers Ltd.3. The interpretation of Tariff Entry 72.10 was crucial in calculating the duty payable on the off-cuts cleared for use in manufacturing ancillary items. The Apex Court's decision established that the off-cuts should be subject to the duty rate applicable to waste and scrap of steel under Tariff Entry 7203.20, resulting in a duty payment of Rs. 365 per ton. This interpretation was consistent with the treatment of similar materials in other cases like CCE, Indore v. National Steel Inds. Ltd.4. The judgment emphasized that the duty on processed inputs, such as cut sheets of irregular dimensions, should not be equated with the duty applicable to the inputs themselves. The Tribunal rejected the Revenue's argument that duty payment should equal the credit availed on sheets, citing the Apex Court's precedent in LML Ltd. The decision upheld the previous order, stating that the clearance of used sheets did not warrant duty payment equivalent to the credit availed on sheets.