CHEMPLAST SANMAR LTD. Vs. COMMISSIONER OF CENTRAL EXCISE

JUDGEMENT

(1.) THE captioned appeal challenges an order of the Commissioner (Appeals), Salem who affirmed an order of the original authority demanding an amount of Rs. 3,26,932/ - being duty on waste and scrap of capital goods cleared by the appellants appropriate interest thereon and imposing a penalty of Rs. 50,000/ - on the appellants under Rule 25 of Central Excise Rules, 2002. After hearing both sides on the stay petition, the requirement of predeposit is waived and the appeal itself is taken up for disposal.

(2.) THE facts of the case are that M/s. Chemplast Sanmar Ltd. - Plant II (CSL) had removed copper scrap, MS scrap and used oil filter during the period June, 2005 to May, 2006. The demand under challenge pertains to duty computed at the rate of 16% on the sale price of these items. Learned Counsel for the appellants submits that the demand has been affirmed in the impugned order under Sub -rule (5A) of Rule 3 of CENVAT Credit Rules, 2004 and that there was no such proposal in the show -cause notice adjudicated by the original authority. It is submitted that the proposal was to demand duty on the impugned goods as final products manufactured from the inputs, the goods being waste and scrap of inputs/capital goods. The show -cause notice had relied on Rule 2(h) of the CENVAT Credit Rules to hold that the impugned goods were final products. The appellant challenges the demand on the basis that the impugned goods had not been manufactured by them.

(3.) I have carefully considered the facts of the case and the submissions made by both sides. The impugned order has raised a demand on the appellants on the basis that the goods cleared were final products manufactured by them. The goods cleared are metal scrap and an item of used filter coil. The assessee is engaged in the manufacture of various chemicals and cannot be held to have manufactured the metal scrap or filter coil. Therefore, the demand made by the original authority is without any legal basis. In the impugned order, the Commissioner invokes Sub -rule (5A) of Rule 3 of CENVAT Credit Rules, 2004 to justify the demand on the basis that the goods cleared are capital goods in the form of waste and scrap. He also justifies the demand of duty at the rate of 16% ad valorem being in consonance with the rate of duty applicable to waste and scrap.