1 D.B. CENTRAL EXCISE APPEAL NO.51/2006 UOI Vs. M/s Banswara Syntex Ltd. & Anr. Date : 19.03.2007 PRESENT HON'BLE MR. JUSTICE RAJESH BALIA HON'BLE MR. JUSTICE BHANWAROO KHAN Mr. V.K. Mathur for the appellant. Mr. Sanjeev Johari for the appellant. ________ Heard learned counsel for the parties. This appeal has arisen out of the order of the Custom Excise and Service Tax Appellate Tribunal dated 1st February, 2006 allowing the appeal of the respondent manufacturer in respect of duty levied on removal of MS Scrap on its clearance from the manufacturer's factory. The substantial questions of law framed at the time of admission reads as under:- “Whether in the facts and circumstances of the case particularly keeping in view of the order of Adjudicating Authority concerning the confirmation of demand by reversal of Modvat Credit by the assessee in respect of 2 MS heavy scrap of capital goods on which Modvet Credit have been availed by the assessee was justified in drawing inferences against the revenue by observing that the claim of the assessee about scrap in question being of building material and use of capital goods on which no Modvat Credit has been taken is not controverted.” The learned counsel for the Revenue has contended that in view of the clear admission of the manufacturer in his reply to show cause notice in the first instance that he has removed dutiable Scrap from the factory on sale in respect of which only duty was adjudicated by the adjudicating authority, the Tribunal has clearly erred in holding that the Revenue has not proved otherwise. On the other hand, the learned counsel for the respondent has urged that there was no such admission about the leviability of the duty on removal of such scrap. It was pointed out that what has been stated in the reply that because in respect of certain items, the assessee was not aware until notice came to him that he 3 was to pay duty on the sale of scrap of these items. However, he had made it clear that the Scrap referred to in the show cause notice had not arisen as a result of manufacturing process. The matter relates to the period after commencement of the Cenvat Rules, 2000 under which the levy of duty, which was otherwise payable under Rule 57A of Central Excise rules, 1944 on removal of scrap and waste of inputs and capital goods on which modvat credit has been availed by the manufacturer has been done away with it and even after the amendment of the Cenvat Rules in 2002 such duty is not payable. Therefore, the notice issued on 28th February, 2001, after commencement of the Cenvat Rule was not permissible. So far as MS scrap is concerned, specific plea was taken that these are the waste material of the construction of building on which no modvat credit was availed either as inputs or as capital goods. MS Scrap is constituted in item No.1, 4 and 8 of the show cause notice. 4 The adjudicating authority did not accept the plea of the manufacturer in respect of MS Scrap and aluminum scrap. The other items in the show cause notice were dropped. On appeal, the Commissioner (Appeals) affirmed the order of the adjudicating authority. The Tribunal noted the following submissions made by the manufacturer before it:- “4. In this case, the appellant took a specific stand before the Commissioner that M.S. Heavy scrap is in respect of left over small pieces of building material and in respect of aluminum scrap, the stand taken by the appellant is that it pertains to old and used of capital goods on which no credit has been taken. This fact is not controverted by revenue.” The Tribunal by considering the averments of the manufacturer allowed the appeal and set aside the demand. Hence, this appeal. 5 So far as the MS Heavy Scrap is concerned, the assessee has already taken the plea earlier that these are not the dutiable scrap and did not arise out of the manufacturing process and plea that scrap was of the building material of the construction activity had been specifically stated in his reply submitted after the first reply pointing out the nature of scrap and fact has not been controverted. In view of the above, the finding of the Tribunal that MS Scrap in question was part of building material in respect of which no modvat credit was availed. Hence, the MS Scrap too was non-dutiable as it did not arise out of capital goods used in manufacturing on which modvat credit was availed nor it arise out of manufacturing process. Accordingly, the appeal is dismissed. The order of the Tribunal relating to non dutiability of MS Scrap, which was out come of the construction activity, is sustained. 6 No order as to costs. [BHANWAROO KHAN], J. [ RAJESH BALIA ], J. babulal/