1995 (5) TMI 115 - AT - Central Excise

Tribunal exempts waste from duty, stresses judicial discipline

The Tribunal upheld the appellants' claim that waste and scrap generated during the manufacturing process of hand tools were exempt from duty under ... Waste and Scrap Issues Involved:1. Applicability of Notification No. 171/88-C.E. and Notification No. 214/86-C.E.2. Duty liability on waste and scrap of iron and steel.3. Interpretation of 'duty paid' under the relevant notifications.4. Judicial precedent and its binding nature on similar cases.Detailed Analysis:1. Applicability of Notification No. 171/88-C.E. and Notification No. 214/86-C.E.:The appellants were engaged in manufacturing hand-tools using bars and rods of iron and steel. Waste or scrap generated during this process was cleared under Notification No. 214/86 to job workers, who converted it into ingots and then into bars and rods, which were returned to the appellants without duty payment. The department argued that the appellants' case did not fall under Notifications No. 214/86 and 171/88, as the conditions specified were not met. Specifically, the department contended that the waste and scrap did not qualify as 'raw material or semi-finished goods' under Notification No. 214/86 and that the bars and rods were obtained without payment of duty, thus not fulfilling Notification No. 171/88's conditions.2. Duty Liability on Waste and Scrap of Iron and Steel:The department alleged that the appellants cleared 92.840 Mts. of waste or scrap of iron and steel and received 129.240 Mts. of bars and rods without paying the leviable duty. They demanded a duty of Rs. 2,22,080/- under Section 11A of the Central Excises and Salt Act, 1944. The appellants argued that the waste and scrap generated were exempt under Notification No. 171/88, as they emerged from duty-paid materials. They cited several judgments to support their claim that 'appropriate payment of duty' should include goods cleared without payment of duty under Notification No. 214/86.3. Interpretation of 'Duty Paid' Under the Relevant Notifications:The appellants contended that the term 'duty paid' should include goods cleared without payment of duty under Notification No. 214/86, as they were duty-paid in the context of the notification. They argued that the waste and scrap were inputs under Notification No. 214/86, irrespective of whether they were generated in the factory or purchased from outside. The department disagreed, stating that the waste and scrap were by-products, not raw materials or semi-finished goods, and thus did not qualify for the exemption.4. Judicial Precedent and Its Binding Nature on Similar Cases:The appellants relied on previous judgments, including a Tribunal decision in their favor (Final Order No. E/23/95-B1, dated 23-1-1995), which interpreted similar notifications and upheld their claims. The Tribunal in that case had concluded that 'nil rate of duty' equated to 'duty paid' and that the appellants were entitled to exemptions under Notifications No. 171/88 and 214/86. The department argued that these judgments were not relevant to the current case.Tribunal's Decision:The Tribunal reviewed the judgments and the detailed order in the appellants' own case. It found no reason to deviate from the established judicial precedent, emphasizing the importance of judicial discipline. The Tribunal concluded that the appellants' interpretation of 'duty paid' was consistent with previous rulings and that the waste and scrap generated during the manufacture of hand tools were exempt from duty under the relevant notifications. Consequently, the Tribunal set aside the impugned order and allowed the appeals.