2021 (11) TMI 699 - HC - Customs

Condonation of delay in filing appeal - delay of 779 days in filing the appeal - no cause, much less sufficient cause, shown by the appellant to explain the inordinate delay in filing the appeal - HELD THAT - The Tribunal after taking note of the statutory provisions took note of the decisions of the Tribunal, CESTAT West Zonal Bench, Mumbai in the case of COMMR. OF C. EX. CUS., AURANGABAD VERSUS COSMO FILMS LTD. 2014 (12) TMI 315 - CESTAT MUMBAI and allowed the assessee s case. The said decision was in respect of another assessee who are engaged in the same process of manufacture namely manufacture of BOPP Films. The Tribunal took note of the decision. The Tribunal followed the case of MRF LTD. VERSUS COLLECTOR OF CENTRAL EXCISE, GOA 1998 (11) TMI 233 - CEGAT, NEW DELHI and SUPREME INDUSTRIES LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III 1997 (3) TMI 529 - CEGAT, MUMBAI , which was upheld by the Hon ble Supreme Court in COMMISSIONER VERSUS SUPREME INDUSTRIES LTD. 1998 (3) TMI 676 - SC ORDER wherein it was held that by taking credit the inputs do not become non-duty paid. There is nothing on record to indicate that those decisions of the Tribunal have been reversed or modified by the High Court or by the Hon ble Supreme Court. That apart, we find that the conclusion arrived at by the Tribunal examining the nature of manufacturing activity done by the respondent assessee and the fact that the Polypropylene Granules which were procured being admittedly duty paid items, the bye-product which is generated during the course of manufacture can never be treated as a non-duty paid item. Therefore, the conclusion arrived at by the Tribunal does not call for any interference. The substantial questions of law are answered against the Revenue - Appeal dismissed.

Summary

Issues:
1. Delay in filing the appeal
2. Classification of Reprocessed Polypropylene Granules (RPG)
3. Admissibility of MODVAT credit on waste and scrap of plastics
4. Allegation of irregular MODVAT credit availed by the respondent
5. Interpretation of relevant provisions and case laws

Delay in filing the appeal:
The appellant/revenue sought condonation of a 779-day delay in filing the appeal, attributing it to frequent officer transfers, change of file custodian, and counsel changes. The respondent/assessee contested the delay, highlighting the lack of sufficient cause shown by the appellant. Despite the delay, the Court exercised discretion to hear the matter on merits and allowed the application for condonation of delay.

Classification of Reprocessed Polypropylene Granules (RPG):
The core issue revolved around whether RPG manufactured by the respondent constituted a by-product or a final product, impacting the reversal of Modvat Credit under Rule 57C of the Central Excise Rules, 1994. The Tribunal's decision was challenged by the revenue on the grounds of non-compliance with relevant provisions and notifications, questioning the correctness and reasonableness of the Tribunal's order.

Admissibility of MODVAT credit on waste and scrap of plastics:
The respondent had availed MODVAT credit on Polypropylene but cleared waste and scrap of plastics without duty payment, leading to allegations of irregular credit utilization. The revenue contended that such waste, if arising from duty-paid goods, should attract Central Excise duty. The Tribunal considered statutory provisions and case laws to determine the admissibility of credit on waste and scrap of plastics.

Allegation of irregular MODVAT credit availed by the respondent:
The show cause notice issued to the respondent alleged irregular availing of MODVAT credit, specifically concerning the manufacture of RPG from waste and scrap of plastics without duty payment. The subsequent adjudication order demanded Central Excise duty payment on the cleared waste and scrap of plastics, prompting the respondent to appeal before the Tribunal.

Interpretation of relevant provisions and case laws:
The Tribunal, in its decision, referenced precedents like Cosmo Films Ltd. and MRF Ltd., emphasizing that waste and scrap emerging during manufacturing are by-products, not final products. Citing rulings from different Tribunals and High Courts, the Tribunal concluded that the respondent rightfully availed credit on inputs contained in waste and scrap, as they were by-products of the manufacturing process. The Court upheld the Tribunal's decision, dismissing the appeal and answering the substantial questions of law against the Revenue.