2002 (10) TMI 191 - AT - Central Excise

Summary

Issues Involved:
1. Determination of whether the goods sold by the manufacturers were waste or good quality fibre.
2. Legality of the demand for duty and penalties imposed on the manufacturers and purchasers.
3. Examination of the evidence presented by both parties.
4. Consideration of the limitation period for invoking the demand.

Detailed Analysis:

1. Determination of whether the goods sold by the manufacturers were waste or good quality fibre:
The manufacturers of Polyester Staple Fibre (PSF), namely Reliance Industries Ltd. and Terene Fibres (I) P. Ltd., sold crimped waste and fibre waste generated during the production of PSF. The appellants contended that the waste generated was inevitable and technologically necessary. The department, however, argued that the waste was not waste but good quality fibre removed in the guise of waste. The Tribunal noted that it is technically impossible to manufacture PSF without generating waste. The test reports confirmed the samples as waste, and the department failed to provide positive and direct evidence to prove otherwise. The Tribunal concluded that the goods sold were indeed waste and not good quality fibre.

2. Legality of the demand for duty and penalties imposed on the manufacturers and purchasers:
The adjudicating authority had confirmed the demand of duty and imposed penalties on the manufacturers and purchasers under Rule 173Q and Rule 209A of the Central Excise Rules. The Tribunal observed that once the manufacturers sold the waste to MPPL, they had no control or interest over it. The actions of MPPL or subsequent purchasers were not the concern of the manufacturers. Therefore, the liability for payment of duty could not be fastened on the manufacturers. Consequently, the penalties imposed on the purchasers under Rule 209A were also not applicable.

3. Examination of the evidence presented by both parties:
The department relied on various pieces of evidence, including debit notes, statements, and test reports, to argue that the goods sold were not waste. The appellants countered with test reports confirming the goods as waste and statements indicating that the waste was processed before use. The Tribunal found the evidence presented by the appellants, including test reports and statements, to be credible and uncontroverted by the department. The Tribunal held that the department's case was not supported by positive and direct evidence, and the appellants' evidence was sufficient to prove that the goods sold were waste.

4. Consideration of the limitation period for invoking the demand:
The Tribunal noted that the manufacturers were under physical control of the department until October 1993, and any commodity moving out of the factory was known to the department. Therefore, the invocation of the larger period of limitation for charging the appellants with suppression was not justified. The Tribunal concluded that the demand for duty and penalties was not sustainable due to the lack of evidence and the improper invocation of the limitation period.

Conclusion:
The Tribunal allowed the appeals, setting aside the impugned orders and granting consequential relief to the appellants. The Tribunal emphasized that the goods sold were waste, not good quality fibre, and the demand for duty and penalties was not supported by evidence. The Tribunal also highlighted the improper invocation of the limitation period, further invalidating the department's case.