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2017 (9) TMI 273 - AT - Central ExciseLiability of duty - poly chips both virgin and non-virgin, manufactured and consumed further by the appellant/assessee in the manufacture of 210d yarn which is exempted - marketability/excisability - whether batch non-virgin poly chips are marketable and chargeable to duty as excisable goods? - Held that - the batch non-virgin poly chips are emerging due to deliberate manufacturing process by the appellant/assessee. During the course of polymerization of caprolactam the main virgin poly chips are produced which are washed in the hot water resulting in emergence of pure virgin poly chips and wash water. The wash water is put to further process, as already discussed earlier in this order, resulting in the production of batch non-virgin poly chips. Regarding requirement of nitrogen packing we note that such packing will be required when the product is cleared to some distance. In the present case, in an integrated chemical plant, for captive consumption there is apparently no need for such nitrogen packing as the product is stored and dealt with in controlled environment for the required use - Tribunal in J.C.T. Ltd. Vs. CCE, Jallandhar 2004 (4) TMI 359 - CESTAT, NEW DELHI has held that if the product is captively consumed which does not require any packing nor any precaution is to be taken in respect of those products; this does not mean that the product loses the capacity of being marketed - Admittedly, non-virgin poly chips are in fact marketed and the appellants/assessee themselves indicated that M/s Suncity did market this product and wanted to compare the value of such sale for adopting to their excise valuation. Hence, we note that special packing required for removal of goods safely to the buyer, which is not required for captive consumption itself, cannot determine the marketability of any product - the batch non-virgin poly chips are excisable products. Benefit of N/N. 111/1995-CE dated 06/09/1995 - Held that - It is apparent that the entire manufacturing process is aimed at producing main virgin poly chips. The technological necessity in the process results in a waste by-product in the form of wash water. In order to extract the available monomer/oligomer for further use from such wash water separate recovery processes are undertaken by the appellant/assessee. Incidentally, we note that in appellant/assessee s own case the oligomer were held to be classifiable under Heading 3916 vide final order dated 05/06/1998 - while the Original Authority allowed the said exemption to batch non-virgin poly chips manufactured out of waste chips etc., he did not allow the said exemption to the non-virgin poly chips attributable to recovery process from unreacted monomer and oligomer contained in wash water. On careful consideration of the findings of the Original Authority and the submissions of the appellant/assessee we note that no distinction can be made in extending the said exemption and batch non-virgin poly chips are eligible for the exemption for the period 06/09/1995 onwards. Benefit of N/N. 47/1994-CE (NT) - Held that - it is apparent that the entire production of chips by SRF Polymers is of batch non-virgin poly chips only. As such, the assertion of the appellant/assessee that SRF Polymers used only non-virgin poly chips in the export of yarn or twine is correct. We hold that subject to verification of supporting documents the consequential benefit available to the dutiable poly chips used in the manufacture of yarn/twine exported out of India should be considered and allowed by the Jurisdictional Authority - matter on remand. Valuation - correctness of assessable value for virgin poly chips for the period prior to 01/07/2000 - Held that - when the appellant/assessee is having certified CAS-4 Standard Cast Data for the periods now in dispute the same should have been adopted by the Original Authority for arriving at the duty liability on virgin poly chips. Incidentally, we also note that in the first round of adjudication the duty demand was based on cost of production. Excisability/duty liability - wash water cleared by SRF Ltd. to their de-merged to sister unit located adjacent, namely SRF Polymers Ltd. - Held that - It is apparent that wash water emerges as a technical necessity in the manufacture of nylon polyamide chips. In order to make virgin polyamide chips, it is necessary to wash the main polymerized chips. Admittedly, for manufacture of nylon polymerized chips the required quantity of caprolactam has to be used. It is not the case that for avoiding generation of wash water, lesser quantity of such caprolactam can be used. In other words, the entire quantity of caprolactam used as input in the manufacture of nylon polyamide chips are put to intended use. The unreacted or partially reacted caprolactam of 10% of total quantity is removed by hot wash. This results in emergence of wash water. Since, it contains recoverable monomer as well as oligomer the same is put to further process. We note that considering the process and the technical requirement, wash water cannot be considered as a manufactured product. Time limitation - Held that - the Department is aware of the usage of various inputs in the manufacture of exempted yarn. The appellant/assessee relied upon letter dated 30/10/1991 issued by the Jurisdictional Superintendent of Central Excise as well as show cause notices dated 29/09/1993, 02/03/1994, 09/02/1995 and 26/05/1995 regarding disputed Modvat credit for exempted final product. In this situation, we note that the Department was aware of the manufacture of 210d yarn and various inputs used in such manufacture. The findings of the Original Authority that a particular nature of input used in the manufacture of 210d yarn is not known to the Department is not tenable. Appeal allowed in part and part matter on remand.
Issues Involved:
1. Central Excise duty liability on poly chips (virgin and non-virgin) used in the manufacture of 210d yarn. 2. Demand of Modvat credit on inputs used in the manufacture of exempted 210d yarn. 3. Marketability and excisability of batch non-virgin poly chips. 4. Exemption eligibility under various notifications for batch non-virgin poly chips. 5. Valuation method for virgin poly chips. 6. Excisability and duty liability of wash water cleared to SRF Polymers Ltd. 7. Limitation period for issuing show cause notices. Issue-wise Detailed Analysis: 1. Central Excise Duty Liability on Poly Chips: The central dispute revolves around the excise duty liability on poly chips (both virgin and non-virgin) used in the manufacture of 210d yarn, which is exempted from duty. The Tribunal noted that SRF Ltd. did not contest the duty liability on virgin poly chips but contested the method of valuation for these chips. 2. Demand of Modvat Credit on Inputs: The demand for Modvat credit on inputs used in the manufacture of 210d yarn, which is exempted, was also a point of contention. The Commissioner initially denied the Modvat credit, but the Tribunal directed re-verification of documents to determine the correct quantification of concessions related to exported goods. 3. Marketability and Excisability of Batch Non-Virgin Poly Chips: The Tribunal held that batch non-virgin poly chips are marketable and excisable. It was noted that these chips are deliberately manufactured and can be marketed, thus liable to Central Excise duty. The requirement for nitrogen packing was deemed unnecessary for captive consumption. 4. Exemption Eligibility under Various Notifications: The Tribunal examined the eligibility of batch non-virgin poly chips for exemption under Notification No.111/1995-CE and its successors. It was held that these chips, produced from waste and scrap, are eligible for exemption. The Tribunal emphasized that the wash water, from which these chips originate, is a process waste and not a final product. 5. Valuation Method for Virgin Poly Chips: The Tribunal found that the valuation for virgin poly chips prior to 01/07/2000 should be based on the cost construction method, using certified CAS-4 Standard Cost Data. The Original Authority's best judgment method was deemed inappropriate. 6. Excisability and Duty Liability of Wash Water: The Tribunal concluded that wash water is not a manufactured product and hence not excisable. It was considered a residual waste emerging during the manufacturing process of nylon polyamide chips, with no significant commercial value. 7. Limitation Period for Issuing Show Cause Notices: The Tribunal addressed the issue of limitation for the show cause notice dated 04/10/1999, covering the period from September 1994 to May 1995. It was held that the Department was aware of the manufacture of 210d yarn and the inputs used, making the notice unsustainable due to limitation. Conclusion: The Tribunal disposed of the appeals by both the appellant/assessee and the Revenue with the following key findings: - Batch non-virgin poly chips are marketable, excisable, and eligible for exemption under specified notifications. - Virgin poly chips' duty liability should be valued based on cost construction methods. - Excisable poly chips used in exported yarn/twine are exempt from duty, and Modvat credit need not be reversed. - Wash water is not a manufactured excisable product. - The show cause notice issued beyond the limitation period was not sustainable. (Order pronounced in open court on 20/07/2017)
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