The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that excise duty is not levied on manual segregation of scrap.The two-member bench of Binu Tamta (Judicial Member) and P. V. Subba Rao (Technical Member) has observed that the respondent was neither manufacturing nor producing the plastic scrap. The plastic scrap already exists, and the respondent is...
The Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that excise duty is not levied on manual segregation of scrap.
The two-member bench of Binu Tamta (Judicial Member) and P. V. Subba Rao (Technical Member) has observed that the respondent was neither manufacturing nor producing the plastic scrap. The plastic scrap already exists, and the respondent is only manually separating it from the rest of the scrap. Therefore, no central excise duty can be charged.
The respondent/assessee manufactures lead ingots/lead rods, is registered with the Central Excise Department, and has been paying central excise duty. One of the raw materials used by the respondent is lead scrap, which is not duty-paid and for which no CENVAT credit was availed. This scrap needs cleaning to separate non-lead elements such as plastics before it can be molten to manufacture lead ingots or lead rods. The respondent sold the plastic scrap, so it was removed.
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, viz., lead ingots or lead rods.
The Commissioner (Appeals) 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, and therefore, no duty is liable to be paid.
The department contended that, as per Section 3, duty has to be paid on all goods that are produced or manufactured in India. Section 2(f) defines manufacture, and this process includes processes that are incidental or ancillary to manufacture. According to the CBEC circular dated May 10, 2016, where scrap is separated and removed, it cannot be treated as the removal of goods as such, and duty must be paid as applicable.
The respondent contended that no CENVAT credit was availed on the scrap as it was not duty-paid. From the scrap, the respondent removed the plastic and other materials, and the respondent used lead scrap to manufacture ingots. The plastic waste is sold by the respondent, but it was never manufactured; it emerged during the manual segregation of the scrap. The CBEC’s circular does not apply to this case as it was issued in a different context.
The tribunal held that no duty could be charged on the plastic and other scrap segregated from the input scrap.
Case Title: The Commissioner, Central Excise & CGST, Alwar Versus M/s R.P. Industries
Citation: Excise Appeal No. 50075 of 2020
Date: 01/02/2023
Counsel For Appellant: Sanjay Kumar Singh
Counsel For Respondent: Manoj Makkar, Arvind Birla