METAL CAN COMPANY Vs. CCE

JUDGEMENT

(1.) M/s. Metal Can Co. have filed this appeal being aggrieved by the Order -in -Appeal No. 701 -703/2001 dated 8.8.2001 under which the Commissioner (Appeals) has confirmed the demand and imposed penalty.

(2.) Shri K.K. Anand, learned Advocate, submitted that the Appellants manufacture Metal Containers and avail of Modvat Credit of the duty paid on the inputs; that the defective tin plates are the main inputs which are received by them in odd sizes and which at times contain folds, crimps, wrinkles and other defects; that the plates are first relieved of the defective portion which is total scrap; that the odd size plate is made into regular size sheets by cutting off/trimming its sides; that further big sheet could not be printed on its entire surface and the un -printed portions have to be cut off and such cut offs are nothing cut scrap; that at times entire sheet has to be scraped owing to faulty printing; that for preparation of component like bottom, lids, and rings, sheets are cut, punched which also results in emergence of substantial quantity of scrap; that further, punched out strip is rendered as scrap in the form of (a) ends of strips and (b) perforated strips; that as such scrap can be as high as 50%; that during the financial year 1994 -95 to January, 1997 only a small quantity of scrap (about 0.6% of the plates used) was sold and bulk of the scrap was kept intact in the hope that part of it could be used at some point of time for manufacture of small parts of containers; that when the present Management took over the factory in January, 1997, bulk of the scrap already lying in the factory was disposed of during the period from February, 1997 to January, 1998; that the Asst. Commissioner under Order -in -Original No. 383/388/2000 dated 28.2.2000 held that with the use of prime quality plates normally 25% scrap is generated and quantity above the said norm was of strips chargeable to duty equal to the Modvat Credit taken on tin plates; that the Asst. Commissioner confirmed the demand of duty and imposed penalty which on appeal has been confirmed by the Commissioner (Appeals) under the impugned Order. The learned Advocate, further, submitted that whatever was cleared by them was scrap and the percentage of clearance of scrap was more as in the earlier period very negligible quantity was removed from the factory; that as the Asstt. Commissioner has allowed scrap up to 25% the same should be allowed for the past period also. The learned Advocate also mentioned that the allegation against them is that the inputs had been cleared as such in the guise of scrap; that inputs were not cleared as such as certain processes had been undertaken by them and accordingly provisions of Rule 57F of the Central Excise Rules, 1944 will not be applicable; that what was cleared by them was off cuts of tin plates loosely described by them as strips; that it has been held by the Supreme Court in the case of LML Ltd. v. CCE, Kanpur 1997 (72) ECR 267 (SC) that off cuts of steel sheets would be classifiable under Heading 72.10 of the Central Excise Tariff as shapes. the Supreme Court also held that the word 'Sheet' as contained in Chapter 72 would clearly indicate that cut sheets do not fall under that category. He also relied upon the decision in the case of Indian Gyjpsum Ltd. v. CCE, Delhi wherein it as held that the defective and damaged pieces of gypsum board generated during mar manufacture of gypsum board are to be regarded as waste and scrap and credit of duty paid on inputs used in such defective board is not to be reversed. Reliance has also been placed on the decision in the case of Union Carbide Indus. Ltd. v. CCE 2001 (47) RLT 916. The learned Advocate also contended that the decision in the case of Monica Electronics Ltd. v. CCE, New Delhi , referred to by the Commissioner (Appeals) in the impugned Order, is not applicable to the facts of the present matter as the inputs were damaged prior to the manufacture of the products in the said matter.

(3.) Counting the arguments Shri A.S. Bedi, learned SDR, submitted that the Asst. Commissioner after going into the material and the scrap generated during 1998 -99 and 1999 -2000 came to the conclusion that the scrap generation up to the extent of 25% of the inputs can be treated as reasonable for the normal manufacturing conditions; that the Appellants have cleared the inputs as such in the grab of scrap and according to the provisions of Rule 57F at the relevant time they have to discharge the duty equal to the amount of Modvat Credit taken by them at the time of receipt of inputs. Learned SDR also reiterated the findings as contained in the Adjudication Order to the effect that the effect that the Appellants had not shown generation of scrap on daily basis as required; that the Appellants themselves have mentioned in their letter dated 3.9.1997 that semi -finished goods had to be scrapped due to rusting because of long storage.