2018 (9) TMI 302 - AT - Central Excise

100% EOU - Classification of waste - there were two parts of the unit - the waste generated during the manufacturing process of cotton blended yarn is cleared without payment of duty - whether the waste generated in second part of the unit where the appellant is manufacturing 100% cotton dyed yarn and cotton blended yarn, the waste generated therefrom is to be classifiable under chapter 52 or chapter 55 of the Central Excise Tariff Act or not? - Held that - The issue is covered by the appellant own case WINSOME YARNS LTD. VERSUS CCE CHANDIGARH 2017 (3) TMI 364 - CESTAT CHANDIGARH , where it was held that the same is to be classified under chapter 52 of the Central Excise Tariff Act, 1985 which exempts from payment of duty - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Classification of waste generated during the manufacturing process of cotton blended yarn under chapter 55 of the Central Excise Tariff Act, 1985.

Analysis:
1. Facts of the Case: The appellant, a 100% EOU, was engaged in the manufacture of yarns falling under chapter 52 and 55 of the Central Excise Tariff Act. Two parts of the unit were involved in manufacturing different types of yarn, with waste generation being a key issue. The waste generated during the manufacturing process of cotton blended yarn under chapter 55 was the focal point of the dispute.

2. Allegations by Revenue: The Revenue alleged that waste generated in separate manufacturing processes, specifically waste from cotton yarn and cotton blended yarn, needed to be cleared separately. While waste from cotton yarn did not attract duty, waste from cotton blended yarn, classified under chapter 55, required duty payment. The appellant was accused of not clearing the waste generated during the manufacturing of cotton blended yarn under chapter 55, leading to demand notices for duty payment, interest, and penalties.

3. Appellant's Defense: The appellant's counsel argued that a previous Tribunal decision in their own case supported their stance. Referring to the Final Order, it was highlighted that waste from cotton blended yarn and cotton dyed yarn was not segregated but remained as mixed waste. The duty, if applicable, should only be demanded on waste arising from the manufacturing of cotton blended yarn. The counsel emphasized that the predominant material in the waste was cotton, exempt from duty under chapter 52 of the Central Excise Tariff Act.

4. Tribunal's Decision: The Tribunal, based on the previous decision in the appellant's case, ruled in favor of the appellant. It was noted that the waste, being a mixture of textile materials, should be classified based on the material predominantly present by weight. As cotton waste predominated over other materials in the waste generated, it was classified under chapter 52, exempt from duty payment. The Tribunal set aside the impugned orders, allowing the appeal with consequential relief.

5. Conclusion: The Tribunal's decision clarified the classification and duty liability concerning waste generated during the manufacturing of cotton blended yarn. By emphasizing the predominance of cotton waste in the mixed waste, the Tribunal provided a legal basis for exempting the appellant from duty payment on the waste. The ruling reiterated the importance of proper classification and assessment in excise matters, ensuring adherence to relevant tariff provisions.