9911796707
TMI Blog1985 (1) TMI 225X X X X Extracts X X X X X X X X Extracts X X X X ..... s and as it was believed that they had been removed without payment of Central Excise duty payable thereon under Tariff Item No. 16. Statements were recorded from the Manager of M/s. Vijaya Traders as well as the Quality Control Manager of M/s. Goodyear India Limited. Therein they had stated that the goods seized were not tyres but scrap and no duty was payable thereon and that the removal was in pursuance of an interim order obtained by M/s. Goodyear India Limited from the Delhi High Court in a Civil Writ Petition filed by them. They contended that tread (sic) had been removed in two portions in these goods and they were not tyres and not known as tyres thereafter. 3. Notice dated 11-5-1982 was thereupon issued to both appellants calling upon them to show cause why action should not be taken for contravention of the Central Excise Provisions with reference to these goods as well as other similar materials removed earlier also. In their respective replies the two appellants again contended that the seized goods as well as similar goods removed earlier were all waste and not tyres and the duty was payable thereon and therefore no contravention of the Central Excise provisions had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They had further prayed that the concerned Central Excise authorities should be restrained from levying and collecting duty of excise on waste material arising in the factory of M/s. Goodyear India Limited. In the said proceedings they had applied for interim orders and had obtained an interim order dated 19-11-1981 permitting them to clear waste rubber compound and other waste on execution of a bond in an appropriate form for payment of excise duty thereon. The claim of the appellants is that the seized goods, as well as similar goods cleared earlier, were all waste and the removal thereof was therefore covered by the interim order of the Delhi High Court abovementioned. 6. Therefore, when these appeals were taken up for hearing a doubt was felt by this Bench whether in terms of the said order the goods in dispute in the present proceedings would also be governed within the amplitude of that order and, if so, whether proceeding further with the hearing in these appeals would not in effect be impinging on the order of the Delhi High Court itself. The difficulty felt was that in the event of this Tribunal coming to a conclusion on the excisability of the articles seized (said t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of carcass of tyres not being commercially known as tyres he had produced three affidavits before the Collector also but that the Collector had refused to consider them on the ground that they were not relevant to the issue under consideration. The three affidavits are respectively of - 1. Sri E.P. Rodricks, working as Manager (Development and Production Analysis) in the factory of M/s. Goodyear India Limited; 2. Sri Jagdish Lal Khanna carrying on business as owner and player of trucks under the name and style of M/s. Jaipur Golden Transport Company Private Limited; and 3. Sri Brij Mohan Kaushik, carrying on business, amongst others, in retreading of tyres under the name and style of M/s. New Standard Tyres. All these affidavits are to the effect that if the tread in a automobile tyre is scooped out in one or more places the leftover cannot be used as a tyre and would be a waste product so far as the tyre manufacturer is concerned and that these are not commercially known as tyres. Shri Rodricks has further added in his affidavit that these are sold as waste or scrap, generally at a price which is substantially lower than even the cost of the raw materials used in the prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appears to have been arrived at under letter dated 13-2-1982 (page 20 of the respondent s paper book in the appeal of M/s. Goodyear India Ltd.). This agreement reads that this is in respect of disposal of factory s scrap tyres as and when available without cutting the beads, the specific condition being. please note that you will be required to remove the complete tread from atleast two different places on the cirumference for atleast minimum of 8". Goodyear and other markings will also have to be buffed before these tyres are disposed of. This is to ensure that these tyres cannot be used without retreading. However, you will be allowed to inspect these tyres before loading and free to reject any tyre not found suitable for the purpose being bought. 10. It is admitted that if the bead is cut in a tyre it could not thereafter be remade into a tyre by any process except a re-manufacture thereof if possible. As the agreement originally stood M/s. Vijaya Traders were entitled to remove only such bead cut tyres which were termed as scrap tyres. But subsequently the parties appear to have entered into a fresh agreement under which tyres were to be removed without bead cut but after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Writ Petition in the High Court of Delhi questioning the validity of the trade notice and the directive of the Superintendent and seeking for consequential reliefs as mentioned earlier. In connection with the same they had filed an application for interim orders and had obtained an order dated 19-11-1981 under which they were permitted to clear scrap rubber compound and other waste on execution of a bond. Sri Tayal pointed out that the writ petition related to waste rubber compound and other waste only and removal thereof as seen from the prayer paragraph. Paragraph 3 of the petition deals with the subject matter of the writ and the middle portion thereof reads as follows: During the production of a rubber compound a small quantity of the compound is rejected due to process defects such as wrong mixing or over heating etc. This defective or rejected rubber compound is in the nature of waste. In addition thereto at various stages of the manufacture of such goods rubber cuttings and similar processed waste emerges and is discarded. These waste materials are hence sold at substantially lower price as waste. It is submitted that there is no manufacture of such waste material. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability for payment of excise duty thereon before the removal of the same from the factory. That is why in this letter the words used are - as per rules scrap tyres are to be cut and punched . That would indicate that when the said procedure was being followed, M/s. Goodyear India Ltd. themselves were aware, and were accepting the position, that the tyres to be disposed of as scrap were in fact fully manufactured products but that as M/s. Goodyear India Ltd. found them evidently not fit for marketing or for consumption they were willing to scrap them and render them useless in order to relieve themselves, under the Second Proviso to the Rule 49, of the liability to pay excise duty as provided. But, subsequently, evidently after obtaining the interim order from the High Court, M/s. Goodyear India Ltd. appear to have hit upon the idea of disposing of atleast the retreadable rejected tyres by scooping out the tread in two portions and disposing of the tyres under the name of scrap of waste, though the product continued to retain the shape and structure of a tyre and could, in fact, as evidenced by the agreement dated 13-2-1982 itself, be remade into a serviceable tyre by the proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rocess which was to bring into existence the tyre concerned had been completed the resultant product would not cease to be a tyre falling under the relevant entry (No. 16) merely because the manufacturer felt that the product was defective and should not be marketed under his name for the purposes for which it was intended. 16. In this connection it is further significant to note that M/s. Goodyear India Limited were anxious to buff out their brand name from the tyre but allowed the order particulars to continue, giving an option to the purchaser (M/s. Vijaya Traders) to retread the same and market the resultant product for use as tyres, the contract dated 13-2-1982 making it further clear that it was open to M/s. Vijaya Traders to reject such tyres which were felt by them to be not usable for the purpose for which the purchase was being made, i.e. retreading and resale. This circumstance would also clearly establish that even M/s. Goodyear India Ltd. were satisfied that what were being offered for sale, and what was purchased by M/s. Vijaya Traders, were tyres, though not usable straightaway in the condition in which they stood, after removal of tread in two places. 17. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in 1983 (13) E.L.T. 1186 (case dealing with Bagasse) and 1984 (16) E.L.T. 317 (case dealing with saw dust arising during the sawing of timber logs) dealt with by-products arising during the manufacturing of the main product and the classifiability of the said by-products. Therefore those decisions may not be strictly relevant to this case. The decision in 1983 (14) E.L.T. 2502 dealt with cutting and trimming of Polyurethane Foam coming into existence during the manufacture of Polyurethane products by cutting `buns of Polyurethane Foam. It was held that though such cuttings and trimmings were termed as waste and scrap they are really smaller pieces of high quality and usable Polyurethane Foam and in fact used as such for manufacture of other articles than the main product. It was therefore held that such cuttings and trimmings were classifiable under Tariff Item 15A(3). The contention of Sri Tayal is that similarly in the present instance also even if the manufactured tyres were found by M/s. Goodyear India Ltd. to be not marketable by them due to some defect, they were admittedly sold without cutting or punching and in a fit condition to be retreaded for making them usable tyres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 1.10 per Kg. as against the average price of Rs. 7.50 per Kg. of actual confectionery, the purchasers of such scrap utilising the same for melting to extract sugar for the purpose of preparing cheap syrups used in the preparation of low grade sweetmeats. The assessee contended that such scrap was not known or sold in the market as confectionery and the same is therefore not covered by any item in the schedule to the Central Excises and Salt Act. The Appellate Collector had held that such scrap is nothing but part of the various manufactured pieces of confectionery and that they remained as goods as the sweets which are in whole form and are sold as confectionery. The assessee had contended in their appeal before the High Court that these small bits and crumbs are taken from the floor or cleared from the trays in which they fall and are dumped and that such waste products are known as scraps which are unfit for human consumption. The learned Judge held that if these scraps are broken parts of the boiled sweets certainly they would fall within the definition of confectionery and excise duty was liable to be paid. But he held that the Appellate Collector s findings that these scrap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that as they had to be disposed of due to certain manufacturing defects as scrap they were really waste and therefore neither excisable nor goods with reference to which excise records were to be maintained. Their alternative pleas have been that (1) if held to be excisable the goods under consideration would fall under Item 68 of the tariff (goods not elsewhere specified) and not under Item 16 (Tyres) and (2) if still held as tyres falling under Item 16, they would fall under sub-item III of Item 16 (all other tyres) and not under sub-item I thereof (tyres for motor vehicles) as in the condition in which they were cleared from their factory, someone could use them at the most on animal driven vehicles only and not on motor vehicles. The latter argument at (2) above is a new plea raised for the first time before us; it was not raised before the Collector. But even at the cost of repetition it has to be stated that the goods under consideration had come into existence at the completion of the entire process of manufacture and could not therefore be in the real sense termed as waste arising during the course of manufacture (which alone were described as the subject matter in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt they hatched the ingenious plan of removing such tyres without bead cut under the guise of scrap or waste. The terms of the two agreements with M/s. Vijaya Traders had already been extracted and the significant variation in the above aspect would establish the above conclusion. Sri Ravinder Narain contends that the value realised by the sale of such tyres was a small fraction, about 10%, of the value of normal tyres and this itself should establish that the appellants were bona fide in their belief that such goods were scrap or waste. On looking into the sale price of the goods and a comparison with regular prices (page 31 of the paper book of M/s. Vijaya Traders, paragraph 22 of their appeal), it may be seen that the percentage works out between 25% to 35%. Sri Ravinder Narain contends that the value realised was lower than the cost of the raw materials. But that has not been established; nor would it be a relevant consideration to dub the goods as waste or scrap. 26. Sri Ravinder Narain contends that the goods were being sold after preparation of invoices in which they were being properly described and that necessary entries were being made in the bond register (kept in purs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as contumacious infraction of the provisions of the Excise Law by M/s. Goodyear. Taking into consideration the amount of duty evaded we are satisfied that the penalty of Rs. 75,000/- imposed on M/s. Goodyear was not excessive. 28. So far as M/s. Vijaya Traders are concerned, they are affected by the fine of Rs. 7,500/- imposed by the Collector in lieu of confiscation of the seized goods, the fine of Rs. 5,000/- imposed in lieu of confiscation of their truck and also (as explained below) the duty on the seized goods. In the light of our detailed findings above, we uphold the findings of the Collector that the seized goods were liable to duty and were removed unauthorisedly without payment of duty and without the cover of a Central Excise gate-pass. The goods and the truck which was used in their unauthorised removal were therefore rightly confiscated. The fine of Rs. 7,500/- in lieu of confiscation of the goods is not excessive, having regard to their value and the duty involved. So also the fine of Rs. 5,000/- in lieu of confiscation of the truck is not excessive. We accordingly uphold the orders of confiscation as well as the respective fines in lieu of confiscation. 29. We we ..... 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