1992 (7) TMI 182 - AT - Central Excise

Summary

Issues:
1. Classification of compounded rubber for excise duty under Central Excise Tariff Act, 1985.
2. Applicability of Notification No. 71/68 and Notification No. 152/87 for exemption.
3. Denial of exemption under Notification No. 71/68 and Notification No. 152/87 by the Collector.
4. Interpretation of the manufacturing process for Hawai Chappals and vulcanised rubber sheets.

Analysis:
The case involved the classification of compounded rubber for excise duty under the Central Excise Tariff Act, 1985. The appellants, engaged in manufacturing Hawai Chappals, were served a notice to show cause why Central Excise duty should not be recovered for compounded rubber used in their manufacturing process. The Collector imposed a substantial demand and penalty, which the appellants contested.

The appellants argued that compounded rubber, before vulcanization, should not be considered an excisable product. They claimed exemption under Notification No. 71/68 or alternatively under Notification No. 152/87. The Collector rejected these contentions, leading to the appeal.

The Tribunal analyzed the manufacturing process, noting distinct stages involved. The compounded rubber was first converted into vulcanized rubber sheets before being used in making Hawai Chappals. The Chemical Examiner's report described the compounded rubber as unvulcanized irregular lumps, falling under Heading 4005.00 of the Schedule.

Regarding the exemption notifications, the Tribunal found that the compounded rubber was used in the manufacture of vulcanized rubber sheets falling under Chapter 40. Therefore, the Collector's decision to deny exemption under Notification No. 152/87 was deemed erroneous. The Tribunal concluded that the compounded rubber was eligible for exemption under Notification No. 152/87, as it was utilized in the intermediate stage for making vulcanized rubber sheets.

Ultimately, the Tribunal set aside the Collector's order, allowing the appeal in favor of the appellants. The judgment highlighted the importance of correctly interpreting the manufacturing process and the applicable exemption notifications to determine the excisability of the compounded rubber used in the production of Hawai Chappals.