1999 (12) TMI 213 - AT - Central Excise

Summary

Issues Involved:
1. Excisability of 'waste solvent'.
2. Question of limitation and suppression.

Detailed Analysis:

1. Excisability of 'Waste Solvent':

The appellants, engaged in the manufacture of insulating varnish, generated 'waste solvent' as a by-product. They contended that this by-product did not amount to 'manufacture' and was not excisable. The Department argued that the waste solvent was methanol, falling under sub-heading 2905.10, and thus excisable. The appellants cited several Tribunal decisions to support their claim that waste/scrap arising in the course of manufacture could not be considered excisable goods. They argued that the waste solvent had no commercial utility and was initially disposed of due to pollution hazards, later sold at a nominal price.

The Department countered that the chemical test showed the waste solvent contained about 80% methyl alcohol, making it akin to methanol and thus excisable under sub-heading 2905.10. The Additional Collector held that even if the appellants believed the waste solvent was non-excisable, they were required to declare it in the Classification List, and their omission amounted to fraud, willful mis-statement, and suppression.

2. Question of Limitation and Suppression:

The appellants argued there was no suppression, fraud, or mis-statement as they believed the waste solvent was not excisable. They contended that failure to file a declaration for a waste product could not be considered suppression justifying the extended period of limitation. The Department maintained that the non-declaration resulted in revenue loss and was deliberate suppression. The Additional Collector noted that the waste solvent, containing 80% methyl alcohol, was akin to methanol and should have been classified under sub-heading 2905.10.

The Tribunal considered the appellants' claim of bona fide belief that the waste solvent was not excisable. The Tribunal found that the appellants' failure to declare the waste solvent did not amount to suppression with intent to evade duty. The Tribunal accepted the appellants' contention that the extended period of limitation was not invokable, setting aside the duty demand for the period from 17-3-1985 to 5-7-1988.

Separate Judgments:

Majority Opinion:
The majority opinion, including Member (Judicial) and Member (Technical), concluded that the appeal should be allowed on the ground of time bar alone without going into the merits. They found that the appellants harbored a bona fide belief that the waste solvent was not dutiable goods, and there was no intent to evade duty. Therefore, the demand was hit by limitation.

Dissenting Opinion:
The Vice President disagreed, emphasizing that the waste solvent was methanol and excisable under sub-heading 2905.10. He argued that the appellants' claim of bona fide belief was not convincing, given the significant quantity and value of the waste solvent. He upheld the impugned order on merits and time bar, rejecting the appeal.

Final Order:
In view of the majority opinion, the appeal was allowed, and the impugned order was set aside.