V.K. Agrawal, Member (T) - (1.)THE issues involved in this appeal, filed by M/s. Apollo Tyres Ltd. are whether the waste and scrap of iron and steel cleared by them is chargeable to Central Excise duty and whether the demand is time barred.
(2.)SHRI Joseff Kurian, Ld. Advocate, mentioned that the Appellants manufacture pneumatic tyres and avail Cenvat credit of the duty paid on inputs and capital goods; that the Additional Commissioner, under Order -in -Original No. 50/03 dated 29.10.2003 confirmed the demand of duty and imposed penalty on the Appellants on the metal scrap on the ground that the same is out of the duty paid inputs and capital goods; that the Commissioner (Appeals) also, under the impugned Order, has rejected their appeal holding that the waste and scrap is mentioned in the Central Excise tariff and as such is chargeable to duty and that as the appellants have not apportioned the quantity to scrap generated out of civil work and to scrap generated due to worn out capital goods, the entire quantity has to be considered as excisable. The learned Advocate submitted that the scrap in question is clearly not excisable in view of Note 8 to Section XVI of the Schedule to the Central Excise Tariff Act, they being a unit engaged in the manufacture of tyres (rubber goods) and accordingly, the metal waste and scrap could under no circumstances be treated as excisable; that further in any case the waste and scrap relates to both Modvat and non -Modvat items; that it is incumbent on the Department to prove the durability of the scrap and the burden is not on the Appellants; that the burden is cast upon the Revenue to identify the scrap with the duty paid inputs/capital goods, if any, and to give specific reason as to why the same is dutiable under Rule 57F(18) of the Central Excise Rules, 1944 (i.e. it has to be shown that the waste has arisen from processing of the inputs) and/or under Rule 57, Section (2)(C) of the Central Excise Rules, i.e. it has to be shown that the "capital goods" on which credit was taken are being sold as scrap; that in absence of these specific averments, there is absolutely no basis for confirming the demand of duty. He, further, submitted that the scrap has arisen out of construction material in the factory; that further the item enumerated in the show cause notice is steel packets which is neither inputs or (sic, nor) capital goods; that packing material in which inputs are brought into the factory is not chargeable' to duty as waste as has been held by the Supreme Court in the case of CCE v. West Coast Industrial Gases Ltd., : 2003 (155) ELT 11 (SC). Finally, the learned Advocate submitted that the demand of duty is time barred also as the show cause notice was issued on 19.4.2001 for demanding duty for the period April 1996 to 28.2.2001; that the show cause notice does not allege that there has been any suppression or mis -representation of facts with intent to evade payment of duty. Reliance has been placed on the decision in the case of CCE v. H.M.M. Ltd., : 1995 (76) ELT 497 (SC).
Countering the arguments, Shri Virag Gupta, learned Departmental Representative, reiterated the findings as contained in the impugned Order and submitted that the extended period of limitation is invocable for demanding the duty as the Appellants had cleared the waste and scrap without issuing any Central Excise invoices and without maintaining any statutory records. He relied upon the decision in the case of Designated Authority v. Haldor Topsoe A/S, 2000 (70) ECC 657 (SC) : : 2000 (120) ELT 11 (SC).

(3.)WE have considered the submissions of both the sides. The duty has been confirmed against the Appellants on the ground that they had removed waste and scrap of iron and steel. The show cause notice does not mention as to how the waste and scrap has been generated out of Modvatable inputs or out of which Capital goods in respect of which Modvat Credit had earlier been availed of. The Appellants have contended that they are manufacturing tyres and tubes and as such there cannot be generation of waste and scrap of iron and steel during the process of manufacture. Under Rule 57F of the Central Excise, Rules, 1944, duty was chargeable on the waste only it is (sic, if it) arises in the course of manufacture. In absence of any such details mentioned in either the show cause notice or in the order, it cannot be said that the waste has arisen in the course of manufacture. The packing material in which inputs are packed is not chargeable to duty as held by the Supreme Court in the case of West Coast Industrial Gases Ltd., supra. It has been held by the Supreme Court that there is no specific provision under the Central Excise Rules, considering barrels/drums in which inputs were received as a waste arising out of manufacturing processes. Similarly, the revenue has not mentioned the capital goods on which Modvat Credit was taken and had been sold as scrap and as such Rule 57S(2)(C) of the Central Excise Rules is not attracted. The appellants have also emphasized the fact that the waste and scrap has been obtained in the course of construction actively which is not chargeable to duty as no manufacturing process is involved. In view of this, we set aside the impugned order and allow the appeal.