Judgment:
1. This appeal is against the order of the Collector (Appeals). Under the impugned order the lower appellate authority has upheld the order of the original authority demanding duty amount of Rs. 1,48,448.98 for the unaccounted for quantity of 34.7919 MTs of aluminium scrap removed from the appellant's factory to the job worker's premises. Proceedings, were initiated by issue of show cause notice dated 17.2.1989 for non-accountal of aluminium scrap of a quantity of 43.50 MTs out of the total quantity of 103.946 MTs removed by the appellant during the period 17.8.1988 to 13.10.1988 to the job worker's premises under Rule 57F(2) of the Central Excise Rules, 1944.
2. The learned Counsel for the appellant pleaded that originally show cause notice was issued demanding duty for the unaccounted quantity of 43.50 MTs, but later on by an amendment to the show cause notice dated 17.2.1989, the appellant was called upon to pay duty in respect of a total quantity of 103.94 MTs which were removed under Rule 57F(2) as the lower authority indicated that the appellant was not eligible to avail of the facility of Rule 57F as the scrap was not one of the declared inputs. The learned Counsel pleaded that during the course of manufacture of pistons, the scrap is generated and this scrap is sent to the job worker for melting into ingots which were returned to the appellant's premises, he pleaded that by amending the show cause notice the whole context of the demand changed and the appellant therefore was under the impression that they were required to meet the reason for the demand as contained in the amended show cause notice and not the earlier show cause notice relating to non-accountal of the quantity of 43.5 MTs. He pleaded that the lower authority, however, after considering their pleas proceeded to adjudicate only in respect of the non-accounted quantity of 43.50 MTs and duty was demanded only to the extent of a quantity of 34.7919 MTs which quantity the appellant could not account for. He pleaded that there has been denial of principle of natural justice to the appellant since the lower authority had changed the context of the demand and, therefore, the only point which the appellant was called upon to meet the demand was in respect of the removal of the scrap from the appellant's factory to the job worker's premises for melting where duty was required to be paid at the time of removal of scrap from the appellant's factory. He pleaded that the lower authority had gone beyond the terms of the show cause" notice.
The learned Counsel's attention was drawn to the findings of the Collector (Appeals) in the impugned order wherein he has taken note of this plea of the appellant and has referred to the records according to which the appellant had made his pleas in respect of non-accounted quantity also. The whole issue had been considered, as seen from the order of the lower authority, in the context of both the n 3. The learned SDR pleaded that the lower authority had been fair and demanded duty in respect of only such quantity as was not accounted for by the appellant. He pleaded that legally it can be argued that the appellant was required to pay duty on the entire quantity of the scrap which was removed from the appellant's factory to the job worker's premises.
4. We have given a careful thought to the pleas made by both the sides.
We observe that the appellant had been given permission to remove scrap to job worker's premises following the procedure in terms of Rule 57F(2). The said rule for convenience of reference is reproduced below: Notwithstanding anything contained in Sub-rule (1), a manufacturer may, with the permission of the Collector of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside the factory.
A reading of this rule clearly shows that scrap generated would not be covered by the terms of this rule. This rule provides for only removal of the input as such or if these had been partially processed. What is sent out of the factory is aluminium scrap the disposal of which is covered by Rule 57F(4) which rule for convenience of reference is reproduced below: Any waste, arising from the processing of inputs, in respect of which credit has been taken may (a) be removed on payment of duty as if such waste is manufactured in the factory, or (b) may be removed without payment of duty where it belongs to such class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed.
5. We observe that the appellant has removed scrap as such and therefore, such removal will be governed by the provisions of Rule 57F(4)(a). There was no plea from the appellant nor is there anything on record to show that aluminium scrap was covered by rule 57F(4)(b) and no notification issued in terms of this rule has been brought to our notice. In view of the above, in our view, demand should have been made for the entire quantity of the scrap removed by the appellant in terms of Rule 57F(4)(a). We find that part of the demand has been dropped and duty was only demanded for the quantity unaccounted for.
Demand for removal of the scrap should have been made with reference to the actual removal of the goods from the factory. Legal provision under which the lower authority dropped the demand for the quantity cleared from the factory is not clear and no legal basis has been laid in respect of the same. We find that the Revenue did not file any appeal before the Collector (Appeals) in terms of Section 35E(2) and the lower appellate authority has only confirmed the demand to the extent limited to 34.7919 MTs.
6. The next plea to be considered is whether the demand for this quantity can be said to be sustainable. We hold that this demand is maintainable in law as duty is payable on this quantity for the reasons set out by us above and we also find that the demand was made within the time in respect of this limited quantity.
7. Before parting with this case, we would like to mention that in case permission had been granted wrongly under the law by the authority, that does not clothe the action in pursuance of that with legal cover so long as the demand made is within time and the assessees cannot have grievance in case on interpretation of the correct position, the demand is made.