2017 (6) TMI 944 - AT - Income Tax

MODVAT credit - waste - Whether the clearances of paper waste for purposes of recycling is to be covered under the erstwhile Rule 57 F(4) of Central Excise Rules, 1944 as has been done by the appellant or whether they are to be considered as clearance of waste on payment of duty under rule 57F (18)? Held that - the issue has been settled by the Larger Bench of the Tribunal in the case of Wyeth Laboratory 2000 (7) TMI 109 - CEGAT, NEW DELHI , where it was held that The rules do not impede the desire of the manufacturer to extract as much final product out of the inputs under Rule 57F(2) as possible or desired. The procedures under Rule could be aborted and recourse taken to Rule 57F(4) at a stage, but only at the option of the assessee. The option to exercise the routes available between 57F(2) and 57F(4) procedures remains with the manufacturer and is not lost by a change in form of the input, due to processing - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Rule 57F(4) of Central Excise Rules, 1944 regarding clearance of paper waste for recycling.
2. Applicability of the decision of the Larger Bench in the case of Wyeth Laboratory Ltd. to the present case.
3. Conflict between different Tribunal decisions on the interpretation of the rule.

Analysis:
1. The appeal concerned the clearance of Waste Paper for recycling by manufacturers of Multi Wall Paper Bags under Rule 57F(4) of Central Excise Rules, 1944. The issue was whether such clearances should be considered as partially processed goods or as clearance of waste on payment of duty under Rule 57F(18). The appellant was issued a show cause notice proposing duty demand and penal action. The Assistant Commissioner and Commissioner (Appeals) had differing decisions on the matter, leading to the present appeal.

2. The advocate for the appellant relied on the decision of the Larger Bench in the case of Wyeth Laboratory Ltd., which had been followed in subsequent Tribunal cases involving different commodities. On the other hand, the Revenue argued that the Tribunal had distinguished the Larger Bench decision in cases related to plastics. The core issue was whether the interpretation of the term "waste" in Rule 57F(4) should be limited to inputs not desired for further use in manufacturing the final product.

3. The Tribunal, after considering the submissions and the Larger Bench decision, held that the interpretation of "waste" in Rule 57F(4) should be understood in a limited fashion, restricting it to inputs not desired for further use in manufacturing the final product. The Tribunal found no grounds to distinguish the Larger Bench decision in the present case and decided to follow it, setting aside the impugned order and allowing the appeal. The decision was pronounced in court on 20.06.2017.