2013 (2) TMI 1 - Commissioner - Central Excise

Classification whether the waste arisen during the manufacture of Monofilament yarn is to be classified under TSH 5404 10 00 or TSH 39159050 Assessee were engaged in the manufacture of Synthetic filament yarn falling under Chapter Sub-Heading 3916 10 90 and 5404 10 00 of CETA. During the course of manufacture of Monofilament yarn, wastage of Nylon Monofilament yarn generated. Assessee classified such waste under the Tariff sub-heading 5404 10 00 instead of under tariff sub-heading 3915 90 50 Held that - In the market parlance assessee s end product is not known as plastic, but however the Tariff Heading 3915 covers only waste of plastic. Further Chapter 39 does not apply to materials regarded as textile materials of Section XI and the Chapter 54 is also included under Section XI and hence product being textile waste is not classifiable under TH 3915 Decision of C.C.E., Mumbai-V v. Nirlon Limited 2008 (7) TMI 677 - CESTAT, MUMBAI applies here wherein revenue was not able to provide evidence regarding classification under sub-heading 3950.90. In U. O. I. v. Plastic Packaging Pvt. Ltd 1995(10)TMI 200 - S.C. . no specific entry was provided for waste or scrap for the end product of the assessee falling under Tariff Heading 5404 therefore the Department was precluded to bring the waste in question under Tariff Heading 3915. Waste in question would not merit classification under TH 3915 since the assessee s end product itself is classified under TH 5404 and besides Chapter 54 there was no specific TH to cover the waste, which arises during the manufacture of final product Therefore waste arisen during the manufacture of Monofilament yarn should be classified under TSH 5404 10 00 In favour of assessee

Summary

Issues:
Classification of waste arising during the manufacture of Monofilament yarn under Tariff Heading 3915 90 50 or 5404 10 00.

Detailed Analysis:

1. The appellant, engaged in manufacturing Synthetic filament yarn, faced a dispute regarding the classification of waste Nylon Monofilament yarn generated during the manufacturing process. The Lower Adjudicating Authority (LAA) classified the waste under Tariff sub-heading 3915 90 50 at a duty rate of 16%, contrary to the appellant's classification under 5404 10 00 at a duty rate of 12%. The appellant raised multiple grounds in their appeal against the LAA's decision, alleging errors in classification, non-application of mind, lack of legislative intent, and reliance on incorrect precedents.

2. During the Personal Hearing (PH), the appellant argued that the waste and scrap of yarn should not be considered in the primary form and were not liable for duty under the Tariff Heading 3915 90 50. They referenced a decision by the Hon'ble CESTAT, Mumbai in support of their argument.

3. The Commissioner analyzed the case records and admitted the appeal despite a 9-day delay in filing. The key issue to decide was the classification of waste generated during the manufacture of Monofilament yarn. The LAA had classified the waste under Tariff Heading 3915 90 50 based on a separate heading for waste of plastics, while the appellant contended that as their final product fell under Tariff Heading 5404, the waste should also be classified under 5404. The appellant argued that their product was not known as plastic in the market and that Chapter 39 excludes textile materials of Section XI, making their waste non-classifiable under TH 3915.

4. The Commissioner agreed with the appellant's contentions, noting that the LAA failed to provide reasons for classifying the waste under TH 3915. The LAA did not discharge the burden of proof, and the Chapter 39 exclusion of Chapter 54 was conveniently overlooked. The Commissioner referenced a Tribunal decision supporting the appellant's position and distinguished it from a decision relied upon by the LAA. Additionally, a High Court decision supported the appellant's argument that waste should not be liable for excise duty unless specifically included in the tariff.

5. Based on the findings and discussions, the Commissioner held that the waste should not be classified under TH 3915 since the appellant's final product was under TH 5404, and there was no specific heading to cover the waste. Consequently, the appellant was not liable to pay duty, interest, or penalty as per the impugned order. The appeal was allowed, and the Order-in-Original was set aside.