The assessee Integral Coach Factory (ICF) belonging to the Central Government is engaged in the business of manufacturing passenger coaches both self-propelled and non-propelled, steel freight containers and parts of passenger coaches for railways under Chapter 86 of CET 1985. They are availing exemption under Notification No.62/95 CE dated 16.3.1995.
Alleging that ICF had cleared ferrous and non-ferrous scrap without payment of Central Excise duty, show cause notice was issued proposing to demand duty along with interest and penalty. The assessee replied to the said show cause notice stating that they are eligible for exemption under Notification No.89/95 CE dated 18.5.1995. The Adjudicating Authority, after due process of law, passed an order confirming the demand holding that the assessee was not eligible to claim the benefit of exemption under Notification No.89/95 CE dated 18.5.1995. Aggrieved by the said order of adjudication, the assessee filed an appeal before the Tribunal. The Tribunal after considering the Notification and the proviso and Explanation to the Notification allowed the claim of the assessee.
Aggrieved by the order of the Tribunal, the Department has filed the present appeal.
Held by Hon’ble High Court of Madras
The Hon’ble High court of Madras considered the relevant extracts of Notification No.89/95-CE dated 18.5.1995 which is as follows:
“Waste parings and scrap arising in the course of manufacture of exempted goods and falling within the schedule to the Central Excise Tariff Act, 1985, are exempted from the whole of excise duty leviable thereon, which is specified in the said schedule, provided that nothing contained in this Notification shall apply to waste, paring and scrap cleared from a factory in which any other excisable goods other than exempted goods are cleared.”
The assessee availed the benefit of this Notification in respect of clearance of waste scraps arising out of manufacture of exempted goods. Though exemption in respect of manufactured goods is available in S.No.16(i) of the Table annexed to Notification No.62/95-CE dated 16.3.1995 (as amended), the problem arose because the assessee cleared the exempted goods on payment of duty during the period in dispute. The erroneous payment of duty caused the Department to hold that the goods are other than exempted goods and therefore demand was made.
The Hon’ble Court stated that the Tribunal rightly held that proviso to this Notification would not apply to the facts of the case and the erroneous payment of duty would not render the goods other than exempted goods. So long as the goods manufactured are exempted goods, waste parings, scrap arising in the course of the manufacture of exempted goods would be entitled for exemption as per Notification No.89 of 1995 CE dated 18.5.1995.
In view of the above, the Hon’ble High Court answered the question of law in favour of the assessee and against the Revenue.