1995 (9) TMI 194 - AT - Central Excise

Summary

Issues Involved:
1. Classification and dutiability of waste, parings, and scrap (WPS) of polyurethane foam.
2. Applicability of Notification 53/88 and Notification 54/88.
3. Whether WPS arising from top, bottom, and side skins of polyurethane foam blocks is eligible for nil rate of duty under Notification 53/88.
4. Allegation of inflated production of waste skins.

Summary:

Classification and Dutiability of WPS:
The appellants manufacture articles of flexible polyurethane foam from duty-paid polyol and isocyanide. The initial product, polyurethane foam blocks, have top-skin, bottom-skin, and side-skins that are not fully foamed and need to be cut off. The appellants paid duty on these skins and other WPS prior to January 1990 under Notification 54/88, which covers waste, parings, and scrap of flexible polyurethane foam.

Applicability of Notification 53/88 and Notification 54/88:
The dispute centers on whether the WPS in the form of top, bottom, and side skins of polyurethane foam blocks should be classified under Notification 53/88, which provides a nil rate of duty for WPS of plastics, or under Notification 54/88, which provides a part exemption for WPS of flexible polyurethane foam. The Collector C.E. (Judicial) allowed the respondents' contention that the WPS should be exempt under Notification 53/88, leading to the present appeal u/s 35E of the Central Excises & Salt Act, 1944.

Eligibility for Nil Rate of Duty under Notification 53/88:
The Tribunal observed that Notification 54/88 applies specifically to WPS of flexible polyurethane foam, while Notification 53/88 applies to WPS of all plastics. The Revenue failed to provide evidence that the waste skins were flexible polyurethane foam, ruling out the applicability of Notification 54/88. The Tribunal held that the benefit of Notification 53/88 would be available to the top, bottom, and side skins of polyurethane foam blocks used captively in the manufacture of articles of cellular polyurethane foam. The Tribunal also noted that an assessee is entitled to the benefit of two notifications unless one specifically debars the application of the other.

Allegation of Inflated Production of Waste Skins:
The Revenue alleged that the respondents inflated the production of waste skins from January 1990 onwards. The Tribunal found no substantial evidence to support this claim and dismissed the allegation.

Separate Judgment by Member (T):
One member, however, dissented, holding that the disputed WPS arising from the top, bottom, and side skins of polyurethane foam blocks is not eligible for exemption under Notification 53/88-C.E. and allowed the appeal.

Conclusion:
The majority of the Tribunal dismissed the Revenue's appeal, upholding the respondents' contention that the WPS in question is eligible for nil rate of duty under Notification 53/88.