The Customs, Excise & Service Tax Appellate Tribunal New Delhi ( CESTAT ) recently held that no excise duty on Manual separation of Plastic scrap.
M/s R.P. Industries, The respondent manufacture lead ingots/lead rods and is registered with the Central Excise department and has been paying central excise duty. One of the raw materials used by the respondent is the lead scrap which is not duty paid and no CENVAT credit was availed on it.
During the audit of the respondent by the department, it was felt that duty should be paid on the plastic scrap so separated and sold by the respondent because it had arisen during the process of manufacture of the final products.
On appeal against the order passed by the Commissioner, Central Excise & CGST (Appeals), Jaipur, the Commissioner, observed that the respondent was purchasing non-dutiable scrap lots from various auctions and was segregating them and extracting various types of scrap through a manual process and this process does not satisfy the definition of manufacture under section 2(f) of the Act. Revenue filed an appeal against this order.
Counsel for the respondent submits that the manufacture begins after the scrap is segregated manually. This manual segregation of scrap is neither manufactured by itself nor can it be called a process ancillary to manufacture. Since there is no process of manufacture, no central excise duty can be charged.
The Coram comprising the judicial member Mrs Binu Tamta and the technical member Mr P.V.Subba Rao observed that the respondent is neither manufacturing nor is it producing plastic scrap. The plastic scrap already exists and the respondent is only separating it manually from the rest of the scrap. Therefore, even if this circular is considered, no central excise duty can be charged and the impugned order is upheld and Revenue‟s appeal dismissed.
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