We are sharing with you an important judgment of Hon’ble CESTAT, Mumbai, in the case of Maharashtra Seamless Ltd. Vs. Commissioner of Central Excise, Raigad [2015-TIOL-16-CESTAT-MUM] on following issue:
Whether the Customs duty is leviable on the quantity of burning loss consumed during the course of manufacturing of final products?
Facts & background:
Maharashtra Seamless Ltd. (“the Appellant”) imported round Billets without payment of Customs duty for the manufacture of seamless tubes and pipes in the private bonded warehouse under the Customs license issued under Section 65 of the Customs Act, 1962 (“the Customs Act”) and in terms of Notification No. 20/99–Customs dated February 28, 1999. During course of manufacture, there was generation of steel waste and scrap, which was recoverable and also 2-3% burning loss.
Recoverable waste and scrap was sold on payment of Customs duty in terms of Section 65(2) of the Customs Act while no Customs duty was paid in respect of quantity of burning loss. Hence, the Department issued Show Cause Notice and sought to recover Customs duty on the quantum of burning loss contending that in terms of Section 65(2)(b) of the Customs Act, the quantity of waste and scrap also included the short quantity said to be burning loss.
The Adjudicating Authority confirmed the duty demand along with interest and imposed penalty. Being aggrieved, the Appellant preferred an appeal before the Commissioner (Appeals), who upheld the orders of Adjudicating Authority. Aggrieved by the orders of the Commissioner (Appeals), the Appellant preferred an appeal before the Hon’ble CESTAT, Mumbai.
The Hon’ble CESTAT, Mumbai relying upon the decision in case of Paras Fab International Vs. Commissioner of C. Ex. Kandla [2010-TIOL-963-CESTAT-DEL-LB] held as under:
· Section 65(2)(b) of Customs Act applies only to such waste and scrap which resulted from manufacturing operations and are cleared from the warehouse for home consumption. In the present case, the burning loss does not exist physically, therefore it is neither capable of being cleared from the warehouse nor factually cleared from the warehouse. Hence does not fall under Section 65(2)(b) of Customs Act;
· Explicit provision for levy of Customs duty on the waste and scrap, which is physically available and cleared from the warehouse, is provided but no such explicit provision exists in case of the burning loss. Meaning thereby, quantity of imported material consumed in the final products includes burning loss also as it has same nature as the raw material which gets consumed in the manufacturing of final products.
Therefore, the Hon’ble Tribunal allowed the appeal in favour of the Appellant and held that the no Customs duty is leviable on quantity of burning loss as it is neither cleared out of the custom bonded warehouse for home consumption nor otherwise disposed of, but factually it got consumed in the manufacturing.
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