By TIOL News Service

BANGALORE, MAR 29, 2017: REVENUE has preferred appeals against the order passed by the Tribunal wherein it was observed -

"It can be seen from the above reproduced specimen list that the said items which are cleared by the appellant are scraps arising during the course of manufacturing, replacement, repair or reconditioning of the various machineries, pipes, fittings etc. in the refinery. The finding recorded by the adjudicating authority is that the said items are inputs as such, seems to be misconstrued inasmuch as the description itself indicates that the said items are nothing but scrap or damaged goods which cannot by any stretch of imagination be considered as clearance of inputs or capital goods as such. When there is no clearance of inputs or capital goods as such, question of reversal of CENVAT credit availed on such items does not arise. We find that this matter is now settled by the Apex Court in the case of Grasim Industries Ltd. … In view of the foregoing we are of the view that the demands confirmed …are not sustainable."

The counsel for the Revenue submitted that since the scrap has resulted during manufacturing process, duty is leviable upon clearance.

The High Court viewed that the issue has been fully covered by the decision of the Apex Court in the case of Grasim Industries Ltd Vs. Union of India - 2011-TIOL-100-SC-CX and wherein at paragraph 14 it is observed -

"14. In the present case, it is clear that the process of repair and maintenance of the machinery of the cement manufacturing plant, in which M.S. scrap and Iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is excisable end product, as since welding electrodes, mild steel, cutting tools, M.S. Angles, M.S.Channels, M.S. Beams etc. which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end product. The issue of getting a new identity as M.S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end product. Therefore the M.S. scrap and Iron scrap cannot be said to be a by-product of the final product. At the best, it is the by-product of the repairing process which uses welding electrodes, mild steel, cutting tools, M.S. Angles, M.S. Channels, M.S. Beams etc."

Noting that the items which are enlisted at para 9 of the impugned order of the Tribunal are all scrap of the repairs, more particularly, when manufacturing activity of the assessee is Petroleum Refinery, the High Court held that the issue is covered by the apex Court decision and no question of law would arise for consideration.

The appeals were dismissed.

(See 2017-TIOL-601-HC-KAR-CX)