1998 (3) TMI 626 - AT - Central Excise

Issues Involved:
1. Whether broken pieces of PSC poles are marketable and hence excisable.
2. Applicability of Rule 57F(3) and Rule 57F(4) to the broken poles.
3. Applicability of Rule 57D to the broken poles.

Issue-wise Detailed Analysis:

1. Marketability and Excisability of Broken PSC Poles:

The primary issue is whether broken PSC poles can be considered as marketable and thus excisable. The appellants argued that broken poles are not goods, are not manufactured in the factory, and are not used for the production or manufacture of excisable goods. They contended that broken poles are waste and scrap of final products and not of inputs, and thus, cannot be classified as excisable goods. They relied on the Tribunal's decision in CCE, Indore v. PSC Pole Factory, Mehagaon, which held that broken poles cannot be considered as manufactured goods liable to duty.

The Tribunal, however, found that the facts in the cited case were different and not applicable here. The main question was whether broken poles can be treated as waste arising in the course of manufacture of the final products. The Tribunal concluded that since the broken poles are not marketable as PSC poles, they can be treated as waste arising in the course of manufacturing standard PSC poles.

2. Applicability of Rule 57F(3) and Rule 57F(4):

Rule 57F(3) states that if Modvat credit has been taken on inputs, the credit can be utilized for the payment of duty on waste arising in the course of manufacture of the final product. The Tribunal found that since the defective, bent, and sub-standard poles are waste or scrap, duty should be paid on this waste under Rule 57F(3)(ii). The Tribunal cited the decision in Hindustan Scientific Glass and Fancy Glassware Works & Another v. CCE, Kanpur, where it was held that waste glass is different from its raw materials and is liable to duty.

The dissenting opinion argued that Rule 57F(3) and (4) are enabling provisions that allow the use of accumulated Modvat credit for payment of duty on waste, wherever payable. These provisions are not charging provisions and cannot create a liability to pay duty on non-excisable waste. The dissenting member emphasized that the broken poles are not excisable goods and thus, no duty is payable under Rule 57F(3) and (4).

3. Applicability of Rule 57D:

Rule 57D provides that credit of specified duty on inputs shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse, or by-product arising during the manufacture of the final product. The Tribunal found that Rule 57D(1) provides for a different situation and is not applicable here since the issue is about the duty payable on waste or scrap at the time of clearance.

The dissenting opinion argued that Rule 57D first presupposes the excisable character of the waste and then extends the benefit of credit. It is a beneficial provision and not adverse to the assessees. The dissenting member concluded that the broken poles are non-excisable and thus, the provisions of Rule 57D are not relevant in this context.

Majority Decision:

The majority view, supported by the Vice-President, concluded that the broken PSC poles are non-excisable and non-dutiable. The impugned order was set aside, and the appeal was allowed with consequential relief.

Conclusion:

The appeal was allowed with consequential relief, as the majority concluded that the broken PSC poles are non-excisable and thus, not liable to duty under the provisions of Rule 57F(3) and (4) or Rule 57D.

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