Excise Duty not payable on Waste and Scrap of Packing Material of Inputs when Demand travelled beyond SCN: CESTAT [Read Order]

The Mumbai Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) ruled that the excise duty not payable on waste and scrap of packing material of inputs when demand travelled beyond show cause notice ( SCN ).

Dropping of proceeding by the Commissioner of Central Excise, Customs & Service Tax, Aurangabad that was initiated against the Respondent-Assessee demanding Central Excise duty against non-reversal of credits availed in respect of exempted services, along with interest and proportionate penalty is assailed by the Appellant-Department in the appeal.

The Authorised Representative for the Appellant, Shri Vinod S. Chettiparambil submitted during the course of hearing of the appeal that Appellant had manufactured dutiable good and traded exempted goods, generated as waste, for which it is liable to pay the said duty demanded in the review order, Committee of Commissioners also took the view that trading is an exempted service against which proportional reversal was not done for which the Appellant is liable to pay the duty, interest and penalty and as the order passed by the Commissioner resulted in dropping of the proceedings, Department has preferred the appeal in the present Forum.

In response to such submissions, the counsel for the Respondent Shri Anay Banhatti Advocate, submitted that Show-cause notice was issued on the ground that Appellant was a manufacturer who was also engaged in packing up/emptying inputs from packing material which is incidental or ancillary to the manufacturing process and therefore, it was required to pay Central Excise duty on clearance and sale of those waste and scrap of packing materials, but Appellant had raised a new ground before the Tribunal seeking its indulgence in reversing the order passed by the Commissioner that Respondent was engaged in providing exempted services like trading of goods, which was not alleged in the Show-cause notices.

A Two-Member Bench comprising Dr. Suvendu Kumar Pati, Member ( Judicial ) and Anil G. Shakkarwar, Member ( Technical ) observed that “We are of the view that no demand is raised on the Appellant in the Show-cause notices on the ground that it was engaged in trading which was treated as an exempted service against which it cannot avail credits on inputs but the demand was solely based on the ground that out of two varieties of manufacturing waste, one is exempted from payment of Excise Duty for which demand is raised against non-reversal of the allegedly inadmissible credit availed on those exempted products and it is a settled principle of Law.”

To Read the full text of the Order CLICK HERE

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