Duty liability on scrap generated during repair of plant.

The issue relates to demand of duty on scrap which has arisen while repairing the pipes, tubes, vessels, etc. For replacement of corroded/rusted parts, duty paid plates, pipe fittings, etc. were procured. The worn out portions were replaced by new plates and pipes cut to the required size. The worn out portion thus removed as well as the remnants of the new plate, pipe etc., formed the waste and scrap of metal which, was sold as scrap. In this process, two category of metal scrap was generated – (a) portion of cut away parts from the plant and (b) scrap arising in the course of making new replaced parts.

The Assistant Commissioner has accepted that no duty was chargeable for the scrap mentioned in category (a) above holding that it did not arise as a result of manufacture. He, however, held that scrap accrued from replacement of worn out parts were dutiable.

The Hon’able Tribunal held that the scrap, admittedly, has arisen on account of cutting of new sheets, plates, pipes for the purpose of replacing worn out pipes, it cannot be said that the respondents have manufactured the scrap so as to pay duty on the same.

For full text please refer the decision of the CESTAT, South Zonal Bench, Chennai  in the case of COMMISSIONER OF C. EX., PONDICHERRY Vs. TANFAC INDUSTRIES LTD. [2012 (284) E.L.T. 242 (Tri. - Chennai)]