1999 (8) TMI 356 - AT - Customs

Summary

Issues:
1. Duty liability on plastic waste and sweeping materials arising during the manufacturing process in a 100% Export Orient Unit (EOU).
2. Imposition of penalty under Section 112 of the act for alleged duty evasion.

Analysis:

Issue 1: Duty liability on plastic waste and sweeping materials
The case involved the appellant engaged in coating plastic pipes imported by a consortium for a pipeline project. Plastic waste and sweeping materials emerged during the manufacturing process in the appellant's 100% EOU. The Collector differentiated between plastic strips, considered waste, and the sweeping materials, which were raw polyethylene granules mixed with dirt. The Collector applied Notification 13/81, exempting waste arising in the course of manufacture for a 100% EOU from duty. The appellant argued that the sweeping materials were process waste, as they resulted from the use of raw materials for coating. The Tribunal acknowledged the possibility of the appellant's belief that the materials were waste due to their handling process. Considering the circumstances, the Tribunal found that the imposition of duty was not justified, especially since the goods were cleared to a waste material dealer and not a plastic buyer.

Issue 2: Imposition of penalty
Despite the duty demand on the consortium, the penalty of Rs 25,000 was imposed on the appellant under Section 112 of the act. The Tribunal noted that the appellant was absent and unrepresented during the proceedings. However, after reviewing the appeal memorandum and hearing the departmental representative, the Tribunal found that the penalty was not warranted. The appellant's argument regarding the unsuitability of the plastic in the sweeping for use, as per the consortium's specifications, remained unrebutted. Additionally, the goods were cleared to a waste material dealer, further supporting the appellant's position. Consequently, the Tribunal allowed the appeal and set aside the penalty imposed under Section 112 of the act.

In conclusion, the Tribunal ruled in favor of the appellant, determining that the plastic waste and sweeping materials arising during the manufacturing process in the 100% EOU were not subject to duty liability. The penalty imposed under Section 112 of the act was deemed unjustified and subsequently set aside.