2012 (10) TMI 903 - AT - Central Excise

Waiver of pre-deposit - manufacturer of cigarettes - cut tobacco is used for manufacture of cigarettes. During the course of manufacture of cigarettes using such cut tobacco, also the similar wastes occur alleged that quantity of cut tobacco attributable to emergence of tobacco refuse would not be eligible for duty exemption under Notification No. 52/2002-C.E., - Held that - Waste emerging cannot be treated as arising out of manufacture and cannot be treated as excisable goods - question of such refuse being treated as exempted product or as subject to nil rate of duty does not arise - exception contained in the Notification No. 52/2002-C.E. is not attracted - pre-deposit waived

Summary

Issues:
Waiver of pre-deposit of duty amount under Notification No. 52/2002-C.E. for waste product during cigarette manufacturing process.

Detailed Analysis:

1. Waiver of Pre-deposit of Duty Amount:
The appellant, a manufacturer of cigarettes, sought waiver of pre-deposit of duty amount of Rs. 5,66,12,870/- along with interest and penalties related to the processing waste, specifically tobacco refuse, during cigarette manufacturing. The contention was that the tobacco refuse, emerging as inevitable waste during the manufacturing process, should not be treated as an excisable product. The appellant argued that the refuse does not result from manufacturing and cited relevant judgments to support their stance. On the other hand, the respondent argued that duty on the quantity of cut tobacco, including the portion that becomes refuse, was rightfully demanded during cigarette manufacturing.

2. Interpretation of Notification No. 52/2002-C.E.:
The Tribunal analyzed Notification No. 52/2002-C.E., which exempts goods falling under specific Tariff Items and Chapters if used in or in relation to the manufacture of final products falling under Chapter 24. However, the exemption does not apply to inputs used in or in relation to final products exempted from excise duty or charged at nil rate. The Tribunal observed that the waste emerging during the manufacturing process cannot be considered as arising out of manufacturing and, therefore, cannot be treated as excisable goods. Consequently, the exception in the notification was deemed not applicable in this case.

3. Decision and Order:
After considering submissions from both sides and reviewing the records, the Tribunal held that the waste product, i.e., tobacco refuse, does not qualify as excisable goods and, therefore, the exemption under Notification No. 52/2002-C.E. does not apply. Consequently, the Tribunal granted the waiver of pre-deposit of the duty amount and stayed the recovery until the appeal was disposed of. The operative portion of the order was pronounced in open court on 19-10-2011.

In conclusion, the judgment by the Appellate Tribunal CESTAT, Bangalore, addressed the issue of waiver of pre-deposit of duty amount for waste products generated during the cigarette manufacturing process, interpreting the relevant notification and determining the non-applicability of the exemption to such waste products.