Levy on scrap of capital goods fails where no operative excise rule authorised duty on such clearance.

Duty on clearance of scrap of capital goods was held unsustainable for the June 2000 to May 2001 period because no operative Central Excise rule then authorised such a levy. Rule 57AB covered removal of inputs and capital goods as such from the factory, but it did not extend to scrap of capital goods. In the absence of a specific enabling provision during the relevant period, the demand and associated penalty were set aside in favour of the assessee.

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Issues: Whether duty and penalty were sustainable on the clearance of scrap of capital goods for the period June 2000 to May 2001 in the absence of a specific rule authorising such levy.

Analysis: The demand related to a period after the earlier rule dealing with scrap of capital goods had ceased to apply. Rule 57AB covered removal of inputs and capital goods as such from the factory, but the present case concerned only the scrap of capital goods and not removal of the capital goods themselves. In the absence of any operative provision under the Central Excise Rules for levy on scrap of capital goods during the relevant period, the demand could not be sustained.

Conclusion: The duty demand and penalty were unsustainable and were set aside in favour of the assessee.

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