By TIOL News Service

NEW DELHI, JUNE 30, 2017: THE appellants are engaged in the manufacture of paper tubes and paper cores and avail CENVAT credit on inputs, input services and capital goods.

During the course of manufacture of paper tubes/cores, waste paring and scrap is generated and the same is cleared on payment of Central Excise duty. The waste and paring is also used for packing of goods cleared to their customers.

Revenue contends that the assessee should also pay duty on the 'waste and paring' used for packing of goods. This, the department contends, is because the assessee is not entitled for the benefit of captive consumption notification 67/95-CE.

Demand notices were issued and confirmed by the lower authorities along with imposition of penalties.

It is submitted before the CESTAT that the transaction value for the final product includes all the expenditure including packing used for protecting paper tubes and cores during the course of transportation to the clients; that final products are cleared on FOR destination basis and CE duty is paid on transaction value.

The AR justified the demand.

The Bench observed -

++ We note that the waste and paring arising during the manufacture of paper tubes and paper cores itself may not fall under the category of excisable goods. They cannot be called as final products arising out of manufacturing process.

++ Admittedly, the appellants are paying central excise duty on final products on FOR, at recipient's premises. …As such, the appellant are taking the transaction value for payment of central excise duty considering FOR destination at buyers premises, as the place of removal. The freight charges are added in the value for Central Excise purpose.

++ When waste and scrap of paper is used, in whichever manner, for safe transport and delivery of the final product and the final product suffers duty on FOR destination basis, we find no reason to treat the value of waste and scrap separately for duty purpose by denying the exemption under Notification 67/1995-CE.

Holding that there is no merit in the impugned orders, the same were set aside and the appeals were allowed.

(See 2017-TIOL-2217-CESTAT-DEL)