Commissioner of Central Excise Vs. Indian Aluminum Co. Ltd. and - Court Judgment

Excerpt:
1. heard both sides. the respondents have taken modvat credit in respect of capital goods w.e.f. 13.07.95. they had also brought capital goods to their factory prior to that date when the credit on capital goods was not available. during the impugned period, the respondents have removed various scraps and turnings on which the department has demanded duty on the ground that they have taken credit on the capital goods and that the scraps have arisen out of the same. the lower appellate authority after examining the submissions made by respondents, has come to the conclusion that the impugned scrap has arisen out of the capital goods which were received prior to 13.07.95 and hence the scrap generated out of the same is not dutiable. in their grounds of appeal the applicant commissioner states that the respondents should have kept separate record of the capital goods on which credit was taken and on which credit was not taken. firstly, there is no provision under the rules for keeping separate account of capital goods which have been installed in the production units, and secondly, it is also the case of the respondents that capital goods on which duty credit has been taken are still functioning and they are available for the department for verification. in view of fact that the department itself has not proved that the impugned goods have arisen out of the capital goods on which duty credit has been taken, we do not find any merit in the contention raised in the ground of appeal in this regard.2. the ld. advocate appearing for the respondents fairly states that before the lower appellate authority, they had stated that some of the impugned goods in the form of aluminum turnings, misc. aluminum scrap and ms turnings arose while working on the dismantled capital goods and they were prepared to pay the duty on the same amounting to rs. 1,56,630/- (rupees one lakh fifty six thousand and six hundred thirty only) in respect of the first appeal and rs. 2,32,888/- (rupees two lakhs thirty two thousand and eight hundred eighty eight only) in respect of second appeal. we are surprised to find that the lower appellate authority, despite such a submission made by the respondents, has not directed them to pay this amount and has granted total relief.it is the case of the respondents that only these items arising out of working on the metal are dutiable and they have cited following decisions of the tribunal under which scraps arising out of dismantling old and worn out machinery were held to be not dutiable: 3. considering submissions from both sides, we are of the view that the lower appellate authority's conclusion that the impugned scrap did not arise out of capital goods on which duty credit has been taken requires no interference. however, as regards the aluminum turnings, misc.aluminum scrap and ms turnings are concerned, we modify the order of the lower appellate authority and direct the respondents to forthwith pay the admitted amount of rs. 1,56,630/- (rupees one lakh fifty six thousand and six hundred thirty only) and rs. 2,32,888/-(rupees two lakhs thirty two thousand and eight hundred eighty eight only). the department's appeals are partly allowed by modifying the orders of the lower appellate authority as indicated above.

Judgment:
1. Heard both sides. The Respondents have taken Modvat credit in respect of capital goods w.e.f. 13.07.95. They had also brought capital goods to their factory prior to that date when the credit on capital goods was not available. During the impugned period, the Respondents have removed various scraps and turnings on which the Department has demanded duty on the ground that they have taken credit on the capital goods and that the scraps have arisen out of the same. The Lower Appellate Authority after examining the submissions made by Respondents, has come to the conclusion that the impugned scrap has arisen out of the capital goods which were received prior to 13.07.95 and hence the scrap generated out of the same is not dutiable. In their grounds of appeal the Applicant Commissioner states that the Respondents should have kept separate record of the capital goods on which credit was taken and on which credit was not taken. Firstly, there is no provision under the Rules for keeping separate account of capital goods which have been installed in the production units, and secondly, it is also the case of the Respondents that capital goods on which duty credit has been taken are still functioning and they are available for the Department for verification. In view of fact that the Department itself has not proved that the impugned goods have arisen out of the capital goods on which duty credit has been taken, we do not find any merit In the contention raised in the ground of appeal in this regard.

2. The ld. Advocate appearing for the Respondents fairly states that before the Lower Appellate Authority, they had stated that some of the impugned goods in the form of Aluminum Turnings, Misc. Aluminum Scrap and MS Turnings arose while working on the dismantled capital goods and they were prepared to pay the duty on the same amounting to Rs. 1,56,630/- (Rupees One lakh Fifty six thousand and six hundred thirty only) in respect of the first appeal and Rs. 2,32,888/- (Rupees Two lakhs Thirty two thousand and Eight hundred eighty eight only) in respect of second appeal. We are surprised to find that the Lower Appellate Authority, despite such a submission made by the Respondents, has not directed them to pay this amount and has granted total relief.

It is the case of the Respondents that only these items arising out of working on the metal are dutiable and they have cited following decisions of the Tribunal under which scraps arising out of dismantling old and worn out machinery were held to be not dutiable: 3. Considering submissions from both sides, we are of the view that the Lower Appellate Authority's conclusion that the impugned scrap did not arise out of capital goods on which duty credit has been taken requires no interference. However, as regards the aluminum turnings, Misc.

Aluminum Scrap and MS Turnings are concerned, we modify the order of the Lower Appellate Authority and direct the Respondents to forthwith pay the admitted amount of Rs. 1,56,630/- (Rupees One lakh Fifty six thousand and six hundred thirty only) and Rs. 2,32,888/-(Rupees Two lakhs Thirty two thousand and Eight hundred eighty eight only). The Department's Appeals are partly allowed by modifying the orders of the Lower Appellate Authority as indicated above.