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<h1>Tribunal rules in favor of manufacturer in copper scrap clearance dispute</h1> The Tribunal found in favor of the appellant, a manufacturer of electrical appliances, in a dispute over the clearance of copper scrap generated during ... Waste and scrap - Demand Issues:Interpretation of sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2002 regarding clearance of scrap generated during the conversion of inputs into finished products.Detailed Analysis:The appellant, a manufacturer of electrical appliances, faced a dispute over the clearance of copper scrap generated during the manufacturing process. The Revenue contended that the clearance of such copper scrap falls under sub-rule (4) of Rule 3 of Cenvat Credit Rules, 2002, necessitating the payment of duty equal to the credit taken on the scrap. However, the appellant argued that sub-rule (4) applies only to the clearance of inputs as such, not to scrap generated during the production process. The appellant had already deposited an amount equal to the credit taken on the quantity of scrap sold, amounting to Rs. 1,06,000.Upon hearing both sides, the Tribunal found merit in the appellant's submission. The sale slip identified the item as 'damaged copper tubes,' indicating that the scrap was no longer in the form of the original input received. Therefore, the Tribunal concluded that this was not a case of clearing the input as such, rendering sub-rule (4) inapplicable. The appellant was not obligated to reverse the credit or pay duty on the cleared material as copper tubes; duty was only required on the scrap itself. Consequently, the impugned order demanding duty on the sold item as copper tubes was deemed unsustainable.The Tribunal set aside the impugned order and remitted the case back to the original authority for determining any duty payable on the scrap. If duty was indeed payable, it was to be adjusted from the deposit already made by the appellant, with the remaining amount to be returned. Additionally, the Tribunal found no justification for imposing a penalty in this case and accordingly set aside the penalty.In conclusion, the appeal was allowed by way of remand, providing clarity on the application of sub-rule (4) in cases involving the clearance of scrap generated during the manufacturing process.
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