2013 (12) TMI 977 - AT - Central Excise

Duty demand on plastic scrap - Polycarbonate bottles used for packing and selling of purified drinking water Held that - The appellant is not a manufacturer of plastic scrap - Only the old and used items are sold as scrap by the appellant thus, there is no manufacture involved - duty demand on the plastic scrap is not sustainable Following VVF Ltd. vs. Commissioner of Central Excise, Daman 2009 (8) TMI 915 - CESTAT AHMEDABAD - waste arising during the process of manufacture cannot be considered as marketable product by itself and disposal of waste material by sale and recovery of some value by itself did not render it as marketable or excisable - The waste has arisen either on account of damage of the bottles during the process of use or the plastic bottle has been scrapped after use of the bottles in50 cycles - If by continuously using an item, the said item becomes a scrap, it cannot be said that the so-called waste is a manufactured product. Demand on control samples of purified water Held that - It cannot be said that the appellant had cleared the control samples for purposes other than those stipulated Following Dr. Reddy s Laboratories Ltd. vs. Commissioner of Central Excise, Visakhapatnam 2007 (7) TMI 145 - CESTAT, BANGALORE - samples mandatorily drawn for testing and getting used up/destroyed during testing cannot be considered as excisable goods liable to duty - Revenue has not adduced any evidence that the control samples have been removed from the factory and has not been consumed or lost or destroyed during the course of testing - In the absence of any corroborative evidence of removal of these samples from the factory, the demand of duty on such control samples cannot be sustained Decided in favour of Assessee.

Summary

Issues:
1. Duty demand on plastic scrap
2. Duty demand on control samples of purified water

Analysis:

Issue 1: Duty demand on plastic scrap
The appellant, a manufacturer of purified drinking water, sold damaged polycarbonate bottles as scrap. The department alleged manufacturing of plastic scrap and demanded duty. The appellant argued that selling damaged bottles as scrap does not constitute manufacturing of plastic scrap. Citing precedents, the appellant contended that waste generated during manufacturing or use cannot be considered excisable goods. The Tribunal agreed, stating that waste arising during use or damage of bottles does not amount to manufacturing. Precedents were cited to support the conclusion that disposal of waste material does not imply manufacturing. The demand for duty on plastic scrap was deemed unsustainable in law.

Issue 2: Duty demand on control samples of purified water
The appellant failed to account for control samples drawn for testing shelf-life and customer complaints. The Revenue argued that the absence of records indicated clearance without duty payment. The Tribunal noted that the samples were drawn for testing purposes and not for sale, citing precedents where samples consumed during testing were not subject to duty. The lack of evidence showing clearance or consumption of control samples led the Tribunal to conclude that duty demand on control samples was not sustainable. The Revenue's reliance on a precedent was dismissed as the samples were not shown to have been removed from the factory. The appeal was allowed, setting aside the duty demands with consequential relief as per the law.