1998 (12) TMI 382 - AT - Central Excise

Summary

Issues Involved:
1. Classification of waste, parings, and scrap of flexible PU foam.
2. Applicability of Notification No. 53/88 and 54/88.
3. Marketability and excisability of waste generated during the manufacturing process.
4. Imposition of penalty.

Detailed Analysis:

1. Classification of Waste, Parings, and Scrap of Flexible PU Foam:
The assessees, engaged in the manufacture of flexible PU foam, filed a classification list seeking full exemption from payment of duty on waste, parings, and scrap of plastics under Notification 53/88 by classifying them under sub-heading 3915.90. The Assistant Collector initially held that the waste attracted duty as per Notification 54/88. However, the Collector of Central Excise (Appeals) extended the benefit of Notification 53/88. The Revenue challenged this decision.

2. Applicability of Notification No. 53/88 and 54/88:
Notification 53/88 exempts waste, parings, and scrap of plastics arising from goods on which duty has been paid. Notification 54/88 prescribes a duty rate for waste, parings, and scrap of flexible PU foam based on the quantity cleared. The Additional Collector held that the waste did not arise from duty-paid inputs but from PU foam blocks, thus not eligible for exemption under Notification 53/88. The Tribunal, however, noted that the benefit of Notification 53/88 should be extended to waste arising from duty-paid goods, referencing the Maruti Foam case.

3. Marketability and Excisability of Waste Generated During the Manufacturing Process:
The Tribunal examined the manufacturing process and the stages at which waste is generated. The assessees claimed that the waste generated during foaming was not marketable and thus not excisable. The Tribunal noted that this plea required factual verification and remanded the matter for reconsideration. The Tribunal distinguished between waste generated during foaming (unmarketable) and waste generated during cutting (marketable).

4. Imposition of Penalty:
The Additional Collector imposed a penalty of Rs. 10,000. The Tribunal found no evidence of misstatement or suppression of facts with intent to evade duty, thus ruling out the justification for any penalty.

Separate Judgments:
The Vice President and Member (Judicial) delivered separate judgments. The Vice President emphasized the need to determine the excisability of waste and the applicability of the correct notification. The Member (Judicial) focused on extending the benefit of Notification 53/88 to waste arising from duty-paid goods. The matter was referred to a Third Member due to differing opinions on the excisability and applicability of notifications.

Majority Decision and Final Order:
The majority opinion held that the matter should be remanded for de novo consideration. The Assistant Commissioner was instructed to determine the marketability of the waste, recalculate the duty liability, and verify if any goods were cleared for destruction. The Tribunal also ruled that no penalty was justified due to the absence of malafides.

Conclusion:
The Tribunal's decision emphasized the need for a detailed factual verification to determine the marketability and excisability of waste. The applicability of Notification 53/88 was upheld for waste arising from duty-paid goods, and the imposition of a penalty was ruled out due to the lack of evidence of intent to evade duty.