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Waste and scrap generated
from repairs and maintenance of plant and machinery is excisable
Facts
Assessee is engaged in the
manufacture of white cement. During the period October 1995 to July, 1999
metal waste and scrap was generated in the workshop by cutting of metal
plates, angles, channels, sheets etc., for making of parts of their plant and
machinery, during the course of repairs and maintenance, and these were cut
pieces/trimmings of metal arising during making of parts, which were being
replaced in place of old and worn out parts, although these were not resulting
directly from the process of manufacturing of fine product i.e., cement. The
Commissioner confirmed the demand as these goods satisfied the definition as
contained in section Note 8(a) of section XV of Central Excise Tariff. Hence,
demanded duty and imposed penalty. The assessee filed an appeal before the
Tribunal. The Tribunal held that the scrap did not arise out of manufacturing
activity but arose during wear and tear of machine/machinery and no credit on
machine/machinery was availed, no duty could be demanded. Revenue filed an
appeal against the said order of the Tribunal before the Hon’ble Rajasthan
High Court by framing the below mentioned question of law:
“Whether the Ld. Tribunal is
right in law in dropping the demand and penalty on clearance of waste and
scrap arisen out of cutting of M.S.Sheet, Plates etc., in this workshop as
well as in their plant for making them of required size and specification for
their own use in the factory viz. for repairs and maintenance of
machines/plant “
Held
Section Note 8(a) cannot be
said to be merely put in the Tariff Entry of the Central Excise Tariff. It can
be interpreted to mean to be comprehending, manufacture of metal work and
scrap from “mechanical working of metal and metal goods”. Hence said scrap
would be liable to duty.
Further, as per the
definition of manufacture under section 2(f) of the Central Excise Act, 1944
any process incidental or ancilliary to the completion of manufactured product
also amounts to manufacture and also, it is not necessary that scrap should
emerge in the process of manufacture of excisable goods only and in the
process of manufacture of end product only.
Furthermore, by the process
undertaken by the assessee the spare parts came into existence by giving
welding, bending, grinding or finishing etc., a part required to be replaced
comes into existence which is spare part of a plant and machinery, a distinct
commodity. Hence, the scrap so generated by manufacturing process is liable to
duty.
UOI vs. Grasim Industries
Ltd. – 2008(229) E.L.T. 328 (Raj).
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Glass Filled Nylon Insulating
liners (GFNIL) classifiable under Tariff 39.26 as “Other articles of Plastic”
Product capable of falling
simultaneously under two entries then benefit to go to the assessee.
Facts
The Liners in question were
solely bought by Railways to prevent the rails from getting displaced on
account of weight of such rails. Incidentally, said liners also possessed some
properties of insulation. Assessee claimed classification under chapter
heading 39.26 as “Other articles of Plastic” or under chapter heading 85.46.00
as “Electrical Insulators of any material”
Held
Primarily such liners were
used for preventing displacement of liners. Minimum voltage passes through
these tracks for signaling purpose so that the earthing does not take place if
human body comes in contact with the railway track. Such minimum voltage will
not convert the liners in question into electrical insulators.
Further, the Commissioner
held that it is possible that the impugned goods can be classifiable
simultaneously under both the headings. In that case the benefit should go to
the assessee.
Commissioner of Customs
vs. Vintel Distributors P. Ltd. 2008 (229) ELT 162 (S.C).
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Cenvat credit on Welding
Electrodes is admissible.
Facts
Assessee had availed cenvat
credit on welding electrodes used for repairs and maintenance of plant &
machinery during the period June 2003 to March 2004 under the head “capital
goods”. Proceeding was initiated by Central Excise by issuing Sshow cause
notice denying the said credit. The assessee during the proceedings
alternatively claimed that the welding electrodes would be eligible for credit
under “inputs”. The said notice was confirmed and also consequent appeals by
the assessee before the Commissioner (Appeals) & Tribunal were rejected.
Assessee then filed an appeal before the Hon’ble Rajasthan High
Court. The Hon’ble Rajasthan High Court framed the question of law as under –
“Whether welding electrodes
used for repairs and maintenance of plant and machinery are eligible for
cenvat credit both as capital goods as well as inputs.”
Held
The Hon’ble Supreme Court in
the case of CCE vs. Jawahar Mills held that Capital goods eligible for credit
are either machines, machinery, plant equipment, apparatus, tools appliances
which bring about any change in any substance for the manufacture of capital
goods, or capital goods can be components, spare parts and accessories of the
above referred goods. Further, even moulds & dies, generating sets, weigh etc.
which do not bring about any change in any substance for manufacture of the
final products are also eligible for credit. Hence, the definition of capital
goods is to be interpreted liberally. Therefore, the only requirement is the
goods should be used in the factory of manufacture. Further, the Hon’ble
Supreme Court in the case of JK Cotton & Spinning & Weaving Mills Co. Ltd. vs.
Sales Tax Officer has held that the expression “in the manufacture of final
product” encompasses any process or activity integrally connected with
ultimate production and without which the manufacture of ultimate production
would be commercially inexpedient.
Following the ratios in the
above referred Supreme Court decision the larger bench decision in the case of
Jaypee Rewa Plant vs. Commissioner disallowing the credit on capital goods was
overruled and consequently, welding electrodes are eligible for cenvat credit.
Hindustan Zinc Ltd. vs.
UOI 2008 (228) ELT 517 (Raj).
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No discretion in imposing
penalty under section 11AC, it has to be equal to the duty amount.
Facts
Show cause notice was issued
demanding central excise duty and equal amount of penalty. The duty was
confirmed, however a penalty imposed was much less than the duty demand. The
Revenue went in appeal before Commissioner (Appeals) against imposition of
lower amount of penalty. The Commissioner (Appeals) allowed the appeal of
Revenue by imposing a higher amount of penalty but less than the duty
demanded. Revenue further filed an appeal before the Tribunal against
non-imposition of penalty equal to duty demanded. The Tribunal however,
refused to impose penalty equal to the duty demanded. The revenue therefore
filed appeal before the Hon’ble Bombay High Court. The Hon’ble Bombay High
Court framed the substantial question of law as under –
“Whether, there is any
discretion under section 11AC to impose penalty less than an amount equal to
duty evaded.”
Held
There is no provision for the
amount of penalty being less than the duty demanded except under proviso to
section 11AC, which provides for penalty equal to 25%, when the assessee
surrenders by paying duty and interest. However, in both the cases the penalty
is fixed and there is no discretion for lower amount of penalty. The reason
for such a stiff & stringent provision is that section 11AC is applicable only
to those cases where the evasion of duty is intentional by fraud, collusion,
willful misstatement or suppression of facts. Thus, the person who
deliberately evades duty is required to pay equal amount of duty. Thus, there
is no discretion in imposing penalty under section 11AC.
CCE & C vs. Godavari Manar
Sahakari Sakhar Karkhana Ltd. 2008 (228) ELT 172 (Bom).
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5. Interest under section
11BB of Central Excise Act, 1944 is payable on expiry of 3 months from receipt
of application and not three months after the order of refund
Facts
Assessee filed 8 refund
claims which were rejected by the Revenue on 5-5-1998, 23-3-2000 and
29-5-1998. Assessee filed an appeal before Commissioner (Appeals), who allowed
the claim for refund by its orders dated 10-2-2003 and 7-2-2003. Thereafter,
the assessee filed the claim for interest from the date in which the period of
three months expired from the date of receipt of application for refund under
section 11B till the payment. The claim for interest was rejected by the
Assistant Commissioner. The Assessee filed an appeal before the Commissioner
(Appeals) who allowed the appeal. Revenue filed an appeal before the Tribunal
which was rejected. Revenue filed an appeal before the Hon’ble Bombay High
Court.
Held
Section 11B(1) states that an
application for refund is to be made to AC/DC of Central Excise in the
prescribed form along with the necessary documents. Under section 11B(2) AC/DC
are required to hold inquiry and at the end of the inquiry if the authority is
satisfied that whole or part of the duty is to be refunded, then an order can
be made accordingly.
Section 11BB comes into
operation only when an order for refund has been made under section 11B and if
the duty refundable is not refunded within 3 months, interest should be paid
from 3 month of the date of receipt of application. Explanation below section
11BB creates a deeming fiction that for the purpose of section 11B(2), if an
order is made by an authority higher than AC/DC then the order of the higher
authority would be deemed to be of AC/DC for section 11B(2) of the Act. The
explanation has nothing to do with the postponement of the date from which the
interest is payable under section 11BB. Hence the interest is payable from the
period after expiry of 3 months from the date of receipt of application.
C.CEx vs. Ballarpur
Industries Ltd. 2008(229) ELT 498 (Bom.)
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Redemption fine under
section 125 of the Customs Act, 1962 not imposable if goods cleared without
furnishing undertaking/bond
Facts
The assessee imported
coloured computer monitors. The said goods were cleared without furnishing any
bond or undertaking. The import of the said goods were restricted under para
2.33 of the Foreign Trade Policy and also there was a condition attached that
the said goods ought not to be used for commercial purpose. A show cause
notice was issued alleging that the goods were liable for confiscation as the
same were imported in violation of the Foreign Trade Policy and also the value
of the same was misdeclared. The notice was confirmed imposing penalty &
redemption fine. The assessee filed an appeal before the Commissioner
(Appeals), who reduced the penalty & set aside redemption fine. The revenue
then filed an appeal before the Tribunal for setting aside Commissioner
(Appeals) order. The Tribunal rejected the appeal of the Revenue. The Revenue
then filed an appeal before the Punjab & Haryana High Court for imposition of
redemption fine.
Held
Section 125 of the Customs
Act, 1962 is applicable only in a case where the goods have been cleared
subject to furnishing undertaking/bond etc. Thus, when the goods were already
cleared without furnishing undertaking or bond the same cannot be confiscated
and consequently no redemption fine could be imposed.
Commissioner of Customs
vs. Raja Impex – 2008 (229) ELT 185 (P&H).
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