2017 (9) TMI 1250 - AT - Central Excise

Manufacture - process of cutting of waste plastic container - raw material / packing material - some of plastic containers were found to have defects, breakage, leakage etc. As such plastic containers can no longer be used for the intended purpose, the appellant cleared them as waste - Held that - The appellant has cut the broken / defective containers because these bore the brand name. By such cutting of waste plastic containers no new product with a new name emerges. Such plastic containers before and after cutting are nothing but waste / scrap. It is correct that appellant has no intention to manufacture waste and is registered for manufacture of packaged drinking water - similar issue decided in the case of M/s. Pepsico India Holdings (P) Ltd. Versus CCE- Meerut-II 2015 (10) TMI 1133 - CESTAT NEW DELHI , where in similar situation it was held that manufacture does not take place. The demand is not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Manufacture of waste plastic containers leading to duty liability.

Analysis:
The case involved the appellant, a manufacturer of packaged drinking water on a job work basis for another company. The appellant used raw materials and packing materials supplied by the other company and availed cenvat credit on the duty paid for such materials. During the manufacturing process, some plastic containers were found to be defective and unusable, bearing the brand name of the other company. The appellant cleared these defective containers as waste, leading to a dispute with the department regarding the liability to pay duty on such waste. The department issued a show cause notice proposing a demand for duty, interest, and penalty, which was confirmed by the original authority and upheld by the Commissioner (Appeals), leading to the current appeal.

The appellant argued that cutting the waste plastic containers, which bore the brand name, did not result in the manufacture of a new product and therefore, duty should not be levied. The appellant contended that there was no intention to manufacture waste, and the cutting process did not lead to the emergence of a new product. The appellant relied on previous tribunal decisions and an Apex Court judgment to support their argument against the duty liability on the waste plastic containers.

On the other hand, the department argued that the cutting of waste plastic containers was incidental to the manufacturing process and therefore justified the duty demand raised in the order. The department maintained that the cutting activity amounted to "manufacture" and hence, the duty liability was sustainable.

After hearing both sides and considering the submissions and evidence presented, the tribunal found that the cutting of the waste plastic containers by the appellant did not result in the manufacture of a new product. The tribunal noted that the containers, both before and after cutting, were nothing but waste or scrap, and the appellant had no intention to manufacture waste. Citing relevant case laws and tribunal judgments, the tribunal concluded that the demand for duty on the waste plastic containers was not sustainable. Therefore, the impugned order was set aside, and the appeal was allowed with consequential relief, if any, as per law.