2017 (7) TMI 885

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....the audit, it was found that the appellant had cleared scrap valued at Rs. 30,48,443/- without payment of Central Excise duty. The scrap so sold was produced/manufactured from the capital goods on which Cenvat Credit had been availed. In the manufacturing process, Zinc Oxide Catalyst was also being used as one of the inputs and Spent Zinc Oxide Catalyst, which emerges during the process was also coming out. A show cause notice was thus issued demanding duty of Rs. 4,86,791/- along with interest and proposing equivalent penalty. The demand was upheld by the adjudicating authority along with interest and penalty, aggrieved from which the appellants went in appeal. The Ld. Commissioner (Appeals) upheld the order of the adjudicating authority a....

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....oner (Appeals) has taken the view that waste and scrap generated out of Cenvatable capital goods is considered final product involving Cenvat Credit availed by the assessee. We find that the issue of whether waste and scrap, which is generated in the course of manufacture due to scrapping of worn out parts of capital goods would attract any duty or require reversal of Cenvat Credit before 16.05.2005, when Sub Rule 5A to Rule 3 of Cenvat Credit Rules, 2004 was introduced, was settled by the judgment of Hon'ble Madras High Court in the case of CCE, Pondicherry Vs. CESTAT - 2013 (297) ELT 498 (Mad.) wherein the Hon'ble High Court held as below:- "3. The Assistant Commissioner of Central Excise took the view that the scrap generated in the cou....

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....me made no provision on the reversal of credit or payment of duty by the manufacturer on the waste and scrap of the capital goods at the time of their clearance. Under Notification No. 27/2005, sub-rule (5A) to Rule 3 of Cenvat Credit Rules, 2004 was brought into effect from 16-5-2005. Thus duty liability would be applicable only from 16-5-2005. In the circumstances, the Appellate Authority held that when the scrap had not arisen out of manufacture, but arising on account of wear and tear in the absence of specific provision for such waste and scrap in the relevant rules, duty could be demanded. 5. Aggrieved by this, the Revenue went on appeal before the CESTAT. (Customs, Excise and Service Tax Appellate Tribunal), which agreed with the vi....

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.... manufactured by the assessee that the scrap are generated in the course of such manufacture. In any case, the CESTAT pointed out that the Revenue had not pointed out that the assessee had manufactured Iron and Steel goods or components. 9. Having regard to the above said fact that the expression 'scrap' is defined as metal waste and scrap from the manufacture or mechanical working of metal and metal goods and on the nature of manufacturing activity of the assessee, viz., production of sugar and molasses, we have no hesitation in confirming the order of the CESTAT, thereby, rejecting the contention of the Revenue. Accordingly, the Civil Miscellaneous Appeals are dismissed. No costs." The period in the present appeal is 2003-2004. ....