No Excise Duty on Scrap Materials as they are not emerging due to a Manufacturing Process: CESTAT [Read Order]

Scrap Materials

The Delhi bench of the CESTAT last day held that the excise duty is not payable on scrap materials as they are not incidental to a process of manufacture.

In the instant case, the Assessee is engaged in the manufacture of sweetened/ non-sweetened aerated water liable Central Excise duty. During the process of manufacture, certain scrap materials scrap PVC shell, scrap sugar juice, scrap aluminum, scrap broken glass clear, scrap broken glass green, pet bottles, petroleum coke ash and various assorted waste products etc emerged.

The department took a view that these scraps are subject to excise duty and initiated proceedings against the assessee. On appeal, the first appellate authority confirmed the assessment order.

On appeal, the Tribunal noted that the department’s proceedings did not even identify the goods with any tariff heading to charge Excise duty.

“During such manufacture, these variously assorted scraps arise which in any case cannot be considered as products arising out of a manufacturing process. The view of various judicial pronouncement on this issue has been consistent and clear. Such scrap materials arising as incidental products and even if they were sold for a consideration cannot be considered as excisable products.”

The bench further noticed the decision of the Supreme Court in Union of India vs. Ahmedabad Electricity Co. Ltd wherein it was held that only on the fact that the goods were marketed, excise duty cannot be automatically imposed.

Allowing the second appeal filed by the assessee, the bench observed that “the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging the duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy.”

 

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