1998 (2) TMI 184 - AT - Central Excise

Summary

Issues:
- Whether emptying drums and selling them without payment of duty constitutes manufacture and attracts duty liability.
- Whether the drums after being emptied can be considered as scrap, thereby attracting duty liability.
- Interpretation of Rule 57F(4) in relation to the duty liability on the emptied drums.
- Application of Note 6(a) to Section XVI of the Tariff in determining whether the emptied drums are considered waste.

Analysis:

The appellant, a manufacturer of blended lubricating oil, emptied drums used for raw materials and sold them without paying duty. The issue arose when the authorities claimed duty on the emptied drums, considering them as scrap manufactured in the factory. The appellant argued that merely emptying drums does not constitute manufacturing and that the drums remain the same after emptying. The appellant relied on precedents and circulars to support its contention that duty is not payable on such drums.

The department contended that the processing of inputs amounts to manufacture, citing a previous decision. The Tribunal analyzed Rule 57F(4) and stated that duty is liable on waste resulting from the manufacturing process unless exempted, requiring a process of manufacture and the emergence of scrap. The Tribunal noted that the emptied drums did not undergo a significant change to be considered a new product, emphasizing that the issue was not raised by either party or fully considered by the Commissioner.

Even if manufacturing is accepted, the Tribunal found that the emptied drums did not qualify as waste under the Tariff, as they were still usable as barrels. The Tribunal concluded that the drums did not become waste or scrap, as per the relevant tariff provisions. Therefore, the appeal was allowed, and the duty demand was set aside.

In summary, the Tribunal ruled in favor of the appellant, stating that emptying and selling drums without duty payment did not amount to manufacturing scrap. The decision emphasized the lack of evidence to support the drums being classified as waste or scrap, ultimately leading to the setting aside of the duty demand.