2012 (11) TMI 355 - AT - Central Excise

Demand of duty - During the course of manufacturing finished products, plastic flakes are generated, which are recycled in the process by converting them into plastic granules alleged that assessee is liable to discharge duty on the flakes, which are converted into granules, since they are intermediate products Held that - They have discharged more duty on the reprocessed granules than the amount of duty that they would have discharged on the flakes, if they would have removed the said plastic flakes from the factory premises - appeal filed by the Revenue is rejected

Summary

Issues:
Duty liability on reprocessed plastic granules and plastic flakes arising during manufacturing.

Detailed Analysis:

Issue 1: Duty liability on reprocessed plastic granules
The appeal by the Revenue challenges the order holding that reprocessed plastic granules, cleared on payment of duty, are exempted under Notification No. 04/2006. The Revenue argues that the granules should be considered dutiable as they can be sold as waste and scrap. The respondent contends that the notification's exemption is conditional, requiring the granules to be reprocessed out of scrap or waste. The Tribunal notes that the duty paid on the granules includes the cost of processing flakes into granules. The Commissioner's order highlights that the exemption does not apply to granules generated using virgin plastic materials, affirming the eligibility for the benefit of the notification. The Tribunal upholds the Commissioner's findings, rejecting the Revenue's appeal.

Issue 2: Duty liability on plastic flakes
The key question is whether duty is required on plastic flakes that arise during manufacturing, which are used for further processing. The Tribunal observes that the Revenue's case hinges on the exemption of reprocessed granules, leading to the duty liability on the flakes. However, the Tribunal finds that the plastic flakes are processed into granules within the factory, with most granules used internally and only a minor quantity cleared on payment of duty. The Tribunal concludes that the duty liability on the flakes is covered by the duty paid on the reprocessed granules, rendering the appeal by the Revenue meritless.

In conclusion, the Tribunal dismisses the Revenue's appeal, affirming the lower authority's decision that the duty liability on plastic flakes is adequately covered by the duty paid on the reprocessed granules. The judgment clarifies the application of Notification No. 04/2006 and the treatment of waste and scrap in the manufacturing process, providing a comprehensive analysis of the duty liability issues involved in the case.