By TIOL News Service

MUMBAI, JAN 28, 2016: BOTH, the assessee and the Revenue are in appeal against the order passed by the Commissioner (A).

Whereas the appellant-assessee is aggrieved by the said order to the extent that it reverses the order-in-original which granted relief to them, Revenue has filed the appeal on the ground that the first appellate authority has not quantified the demand, interest thereof and penalty while setting aside the order-in-original.

The facts are that during the period 2003-04 and 2004-05 the assessee, under commercial invoices, were clearing the items such as impure dowthermdiphyl; old and damaged PTA scrap, wash water - 50% concentration of lactum, old and used sludge oil; old and used all types of oil, spin finish oil and old assorted bearings without payment of CE duty.

The Audit team noticed this and the objection got converted into a SCN dated 29/05/2008 demanding CE duty on these clearances.

The adjudicating authority dropped the proceedings by relying upon the judgment of the Tribunal in appellant's own case in respect of some other items 2008-TIOL-2218-CESTAT-MUM.

The Revenue filed an appeal before the Commissioner (A) and that is how the matter came before the Tribunal, as mentioned at the outset.

The appellant-assessee submitted that in the same audit objection another waste product which arose during the manufacture of the nylon yarn i.e., waste MEG and TEG was also mentioned and duty liability was proposed to be fastened on them and which proceedings were settled in their favour by the Tribunal order No. A/697-698/08 dated 23/07/2008 - 2008-TIOL-2218-CESTAT-MUM by way of dismissal of Revenue appeal. It is also emphasized that it is not the contention of revenue that these items are not scrap. Reliance is placed on the following decisions viz. Grasim Industries Ltd. - 2011-TIOL-100-SC-CX & DSCL Sugar Ltd. - 2015-TIOL-240-SC-CX wherein it is held that waste/scrap, even if they are marketable, are not liable to duty unless they are manufactured.

The AR supported the order of the lower appellate authority which confirmed the CE duty liability.

The Bench observed -

"…It is on record that the items on which duty demands are made are arising during the course of manufacture of the final products for the period in question. It is also undisputed that the assessee-appellant is clearing the products on commercial invoices and gets some consideration for the said items. At the outset, on perusal of the items which are cleared from the factory premises, description as per the annexure to the show cause notices, it may be seen that they are either used, old or damaged wash water, old and used sludge oil and old assorted bearings. The description itself would indicate that these products are not manufactured nor they are associate product and, therefore, cannot be said to be distinct products as contended by the learned Departmental Representative. There is nothing on record to indicate that these items, which were sought to be considered as distinct product, were being manufactured in the appellant's factory premises. Secondly, I find, arising out of the very same audit objection, another show cause notice was issued demanding duty on the used/waste MEG/TEG that arises during the course of manufacture in the factory premises of the appellant and the said demand was set aside by the first appellate authority; Revenue's appeal before the Tribunal in appeal No. E/1523/2003, was rejected by an order dated 23/07/2008 (wherein I was one of the Member) holding that these items (used MEG) is not a manufactured product for demand of duty. In the case in hand, undoubtedly there is nothing on record to show that these products, which arise during the process of manufacture, are manufactured products…."

Noting that the issue seems to be covered by the case laws cited by the appellant-assessee, the CESTAT held that the impugned order is unsustainable and so set aside the same. The appeal by the assessee was allowed and that by the Revenue was rejected.

(See 2016-TIOL-276-CESTAT-MUM)