TMI Blog2011 (5) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... facts, in brief, are that the appellants are manufacturers of lead/zinc metal concentrates falling under Chapter Heading 26 of the Schedule to the CETA, 1985. They are paying excise duty on the final products with effect from 27-7-96 and availing modvat credit on inputs and capital goods from the said date. Investigation was commenced by recording statement of Shri R. Mahidhar Kumar, Senior Manager (Material) and authorised signatory on 17-10-2002. The appellants produced details of sales of waste and scrap arising from inputs and capital goods. These details were furnished during the period 17-10-02 to 16-11-02. The appellants were directed to produce documentary evidence in support of their contentions at the time of recording of statement and the said details were not furnished. A show cause notice dated 25-3-03 was issued proposing demand of duty/an amount equal to duty amounting to Rs. 22,33,063/- on the scrap of inputs and capital goods removed during the period 1997-98 to 2001-2002. Show cause notice also proposed recovery of interest and imposition of penalty. The original authority confirmed demand of Rs. 20,68,330/- along with interest and imposed penalty of equal amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1-4-2010, the waste and scrap of inputs used by the appellants required to be cleared on payment of duty as if manufactured in their own factory in terms of section 57F(18). He also submits that in terms of Rule 57S(2)(c) waste and scrap of capital goods requires to be cleared on payment of duty. The duty has been demanded on the transaction value. The appellants have failed to substantiate the claim that what was cleared by them during the period 1997-98 to 2001-02 related to waste and scrap of capital goods procured by them prior to 1996 when they started availing modvat credit. They have also failed to produce the relevant documents and failed to raise excise invoices in respect of clearances. 5.2 Learned SDR submits that during the period from 1-4-2000 Commissioner has not demanded duty on waste and scrap arising out of capital goods and inputs but has demanded duty only in respect of inputs/capital goods used in the mechanical working which was undertaken for manufacture of parts and components in connection with maintenance and repair activities. 5.3 In view of the above, he supports the order of the Commissioner including invocation of extended period and imposition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so find that for the period from 1-4-2000 Commissioner (Appeals), taking note of absence of provisions similar to Rule 57F(18) and Rule 57 S(2)(c) has held that no duty on waste and scrap of capital goods arising due to wear and tear was chargeable. However, he has confirmed demand of duty on MS waste and scrap generated by use of MS plates, sheets, angles, etc. during the course of manufacture/repair of capital goods. His findings in this regard are reproduced below : As far as (2) above is concerned the adjudicating authority has held that these were arising firom the process of manufacture and therefore, liable to pay duty. It is observed that the waste and scrap cleared by the appellants was generated by cutting of metal plates, angles channels, sheets etc. for making of parts of their plant and machinery during the course of repair and maintenance. The process undertaken by them can definitely be covered by the expression mechanical working of metal as given in the definition of waste and scrap (supra). Thus, these goods seem to satisfy the definition as contained in Section Note 8-A of Section XV of the Central Excise Tariff. Hon ble Tribunal s decision in the case of Bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same subject matter. Hence, the decision is of no help to decide the issue in question. 11. The Rajasthan High Court in Grasim Industries case after taking note of the fact that M.S. Scrap and Iron were generated during the process of repairs and maintenance while dealing with the similar issue involved in the matter held that the category of scrap generated by cutting of plates, sheets etc. is obviously was in the course of repairs and maintenance of the plant and machinery and though it is not excisable, but then, the part which is replaced, either as a whole, or in part, is very much a product, coming into existence, as a result of manufacturing process, by using the raw material, being plates, sheets, welding electrodes charmels, beams, angles etc. and by using such raw material, and subjecting it to manufacturing process, by giving welding, bending or finishing etc. a part required to be replaced comes into existence being which is obviously a spare part of the plant and machinery, a distinct commodity, and is placed in the plant and machinery, as a spare part, or as a replaceable part, it was held that in such circumstances in the process of manufacturing of such part, me ..... 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