1990 (5) TMI 131 - AT - Central Excise

Summary

Issues Involved:
1. Classification and dutiability of wire netting scrap under Central Excise Tariff Item 68.
2. Validity of the demand for duty and imposition of penalty on wire netting scrap cleared without payment of duty.
3. Applicability of Notification No. 33/81 dated 1-3-1981 for exemption from duty on wire netting scrap.

Detailed Analysis:

1. Classification and Dutiability of Wire Netting Scrap:
The primary issue in both appeals was whether the wire netting scrap produced by the appellants is chargeable to duty under Central Excise Tariff Item 68. The appellants argued that the wire netting scrap is not an excisable product attracting duty, relying on several precedents including the decisions in Modi Rubber Limited v. Union of India and Collector of Central Excise, Kanpur v. Gayatri Glass Works. The Tribunal agreed with the appellants, noting that scrap is not assessable under Item 68 as it is a rejected product, not intentionally manufactured prime goods. The Tribunal emphasized that the wire netting scrap, arising in the course of manufacture, does not constitute a finished product with a new name, character, or use, and thus should not be classified under Item 68.

2. Validity of the Demand for Duty and Imposition of Penalty:
The second appeal addressed the demand for Central Excise duty of Rs. 37,234.95 and the imposition of a penalty of Rs. 2,000/- on the appellants for clearing wire netting scrap without payment of duty. The Tribunal found that the appellants had included wire netting scrap in their classification lists filed for successive years and had claimed exemption under Notification No. 33/81. The Tribunal noted that the department had initially approved the classification list, indicating that the goods were eligible for duty-free clearance. The Tribunal held that the demand for duty on clearances up to 31-3-1982 was not justified, as these were made pursuant to the approved classification list. For clearances after 1-4-1982, although the appellants had filed a revised classification list under protest, the Tribunal set aside the levy of duty based on its decision that the product does not attract classification under Item 68.

3. Applicability of Notification No. 33/81:
The appellants contended that they were entitled to exemption from duty under Notification No. 33/81, which exempts waste and scraps of copper falling under Item No. 26A. The Tribunal agreed, noting that the conditions stipulated in the Notification were satisfied, as the waste and scrap arose from copper on which appropriate duty had already been paid. The Tribunal rejected the department's argument that the exemption was not applicable because the waste arose after the manufacture of the wire netting. The Tribunal concluded that the waste and scrap arose in the course of manufacturing the wire netting itself and thus qualified for the exemption.

Conclusion:
The Tribunal set aside both the impugned orders and allowed the appeals, holding that the wire netting scrap is not dutiable under Tariff Item 68 and that the appellants were entitled to exemption under Notification No. 33/81. The appellants were granted consequential benefits, including the refund of duty and penalty deposited by them.