2000 (7) TMI 533 - AT - Central Excise

Summary

Issues:
Classification of scrap cured cut tyres and tubes under Central Excise Tariff, benefit of Notification No. 76/86-C.E., whether cutting of tyres and tubes into smaller pieces constitutes manufacturing activity attracting duty, applicability of previous judgments on similar issues.

Analysis:
The case involves the classification of scrap cured cut tyres and tubes under the Central Excise Tariff and the applicability of Notification No. 76/86-C.E. The Revenue contended that cutting tyres and tubes into smaller pieces results in the emergence of waste and scrap, which should attract duty under Heading 40.04. They argued that the benefit of the notification should not extend to scrap originating from the product mentioned in the notification. The Revenue also emphasized that the scrap generated from cut tyres and tubes is marketable and dutiable. They challenged the reliance on previous judgments, stating that the new tariff specifically mentions waste and scrap under sub-heading 40.04, making the earlier decisions inapplicable.

On the other hand, the respondents argued that the scrap cured tyres and tubes are a byproduct of the manufacturing process and not a result of a separate manufacturing activity. They relied on judgments such as Moti Laminates and Hyderabad Industries Ltd. to support their claim that no duty should be levied on the scrap as it does not arise from a process of manufacture. They also highlighted that the invoices described the items as cut tyres and tubes, entitling them to the benefit of the notification. Additionally, they contended that the scrap should not be classified under Heading 40.04 as it does not meet the criteria specified in the Tariff.

The Tribunal analyzed the issue carefully, considering the previous judgments and the nature of the manufacturing process. They noted that the cutting of tyres and tubes into smaller pieces does not constitute a separate manufacturing activity but is a disposal of defective products. Referring to the Delhi High Court's decision in Modi Rubber Ltd., the Tribunal held that destruction by cutting and punching to turn products into waste and scrap is not an event of manufacture and does not attract excise duty. They emphasized that the scrap of a final product already found unfit for consumption and market should not be classified under waste and scrap in Heading 40.04.

Moreover, the Tribunal pointed out that the Notification No. 76/86 grants exemption to cut tyres and tubes without specifying restrictions on further cutting or punching. They rejected the Revenue's argument that the scrap should be classified under Heading 40.04, emphasizing that the waste, parings, and scrap mentioned in the Tariff refer to unvulcanized rubber, not hardened rubber like cut tyres. Ultimately, the Tribunal found no merit in the Revenue's appeal and rejected it based on the analysis of the manufacturing process and classification criteria under the Central Excise Tariff.