1991 (8) TMI 199 - AT - Central Excise

Tribunal rules in favor of duty payment on brass & zinc scrap, emphasizes need for specific provisions

COLLECTOR OF CENTRAL EXCISE Versus NUCON INDUSTRIES PVT. LTD.

The Appellate Tribunal CEGAT, Madras allowed the Department's appeal against the lower authority's decision in favor of the manufacturers of pneumatic ... Modvat Credit Issues:Interpretation of Rule 57F(2) and Rule 57F(4) regarding removal of scrap without payment of duty, applicability of trade notice, and authority to issue necessary notifications exempting scrap from duty.Analysis:The appeal before the Appellate Tribunal CEGAT, Madras was filed by the Department against the order of the Collector of Central Excise (Appeals), Madras. The lower appellate authority had ruled in favor of the Respondents, who were manufacturers of pneumatic control equipment, stating that the movement of scrap generated during manufacturing was allowed under Rule 57F(2) based on a trade notice issued by the Hyderabad Collectorate. However, the Department contended that the scrap of brass and zinc could not be removed under Rule 57F(2) as there was a specific provision under Rule 57F(4)(a) for removal of scrap on payment of duty. The Department sought to set aside the lower appellate authority's order.The Respondent's consultant argued that although the trade notice only covered aluminum scrap, the scrap of brass and zinc should be treated similarly as the purpose and use of all scraps were the same as outlined in the trade notice. The Tribunal observed a conflict within the Government where one department allowed scrap removal without duty, while another sought to nullify this. The Tribunal suggested that the Department should have approached the Board for necessary notifications exempting all scraps sent out for recycling if the intention was to allow duty-free removal. The Tribunal examined Rule 57F(2) and Rule 57F(4) to determine the admissibility of the benefit allowed under the trade notice.Rule 57F(2) permits the removal of inputs after partial processing, but scrap generated during manufacturing cannot be considered an input or partially processed input. The specific provision for scrap treatment is under Rule 57F(4), which allows scrap to be removed on payment of duty, exempted under specific conditions, or destroyed. The trade notice covering only aluminum scrap could be considered an order of the Central Government for sub-rule (b) of Rule 57F(4) for aluminum, but not for brass and zinc scrap. Therefore, the Tribunal held that the lower appellate authority's order was not legally sustainable, and the appeal of the Revenue was allowed, setting aside the lower authority's decision.In conclusion, the judgment clarified the distinction between Rule 57F(2) and Rule 57F(4) regarding the removal of scrap without duty payment, emphasized the importance of specific provisions for scrap treatment, and highlighted the necessity of proper notifications for duty exemptions. The Tribunal's decision favored the Department, emphasizing the legal requirement for duty payment on brass and zinc scrap unless covered by specific exemptions.