2001 (6) TMI 390 - AT - Central Excise

Summary

Issues: Classification of scrap glass under sub-heading 7001.10 for duty imposition and penalty.

In this case, the appellant used glass bottles in their product of aerated waters, leading to breakage of bottles during processing. The resulting scrap was cleared without duty payment, prompting the Assistant Collector to classify it under sub-heading 7001.10 and impose duty and penalty after a show cause notice. The Commissioner (Appeals) upheld this decision, leading to the current appeal. The issue revolved around whether the scrap glass, arising from the manufacturing process, fell under the said sub-heading. The appellant argued that if the scrap resulted in the manufacture of products other than glass, the heading should not apply. However, the Tribunal emphasized that classification should not be based on where the scrap occurs but rather on its nature, citing case law that supported the non-leviability of duty on certain waste materials arising from manufacturing processes.

The Tribunal referred to a judgment by the Calcutta High Court, which held that broken glass or cullets arising in the manufacturing process of glass items could not be considered as manufactured items or by-products with marketability. The High Court's decision highlighted that even within a glass manufacturing factory, such scrap could not be deemed as a manufactured item. The Revenue argued that marketability was established as the goods were regularly sold, but the Tribunal clarified that marketability alone could not determine the leviability of excise duty if the item was not considered a manufactured product. The Tribunal also addressed the Revenue's contention that the Calcutta High Court judgment was based on the old tariff structure, emphasizing that the core issue of manufacture remained unaffected by tariff changes.

Furthermore, the Tribunal noted that the Calcutta High Court judgment had been consistently followed by the Tribunal in similar cases. In a specific case involving manufacturers of electric bulbs, the Tribunal differentiated between manufacturers of glass and bulb, concluding that breaking glass bulbs did not result in a new product. Ultimately, based on the precedent set by the Calcutta High Court judgment and subsequent Tribunal decisions, the Tribunal allowed the appeal, rendering the impugned order invalid. The decision highlighted the importance of understanding the nature of scrap materials in relation to manufacturing processes for appropriate classification under excise duty regulations.