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TMI Blog1998 (12) TMI 382X X X X Extracts X X X X X X X X Extracts X X X X ..... he rate of duty prescribed is 40% ad valorem + 5% SED + Rs.42 per kg. depending upon the aggregate quantity of clearance of such goods for home consumption as prescribed in the Notification and subject to the conditions laid down therein. After grant of personal hearing, the Assistant Collector vide order-in-original No. 115-CE/90 dated 10-12-1990 held that the waste, parings and scrap of plastics attracts duty @ 40% adv. + 5% SED + Rs. 42/- per kg. depending on the quantity of clearances and approved the classification lists w.e.f. 24-10-1990 accordingly. The Collector of Central Excise (Appeals) vide order-in-appeal No. 35-CE/DLH/91 dated 15-1-1991 set aside the order of the adjudicating authority and extended the benefit of Notification 53/88 dated 1-3-1988 as per Sl. No. 24 thereof. Against this order of the lower appellate authority, the Revenue has preferred E/1933/91-C. 2. After passing of the order dated 15-1-1991 by the Collector of Central Excise (Appeals), a show cause notice dated 22-2-1991 was issued to the assessees proposing levy of duty of Rs. 2,84,160/- being the duty alleged to have been short-paid on - (a) 2596 kgs of waste, parings and scrap of flexible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not paid duty on such blocks of polyurethane foam and as mentioned earlier such waste, parings and scrap of plastics had arisen not from the said inputs but only from blocks of PU foam. In view of this position, the party cannot claim nil rate of duty in respect of waste, parings and scrap of plastics because such waste, parings and scrap had not arisen from duty paid polyether polyon, Tolluene, Dlisocyanate, Silicone, Amine Stannous Octate. The party s contention that waste, parings and scrap generated during the process of manufacture of polyurethane foam carries nil rate of duty is not tenable in view of the fact that the said Notification nowhere mentions that the waste, parings and scrap generated during the process of manufacture of PU foam carries nil rate of duty. Instead the said Notification prescribes nil rate of duty in respect of waste, parings and scrap of plastics falling under Heading 39.15 if such waste, parings and scrap of blocks arise from duty paid goods. This Notification does not cover waste, parings and scrap of plastics generated during the process of manufacture of PU foam. In fact, no waste, parings and scrap of plastics arise out of duty paid inputs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e. 53/88 and 54/88 are reproduced hereunder for ready reference : Effective rate of duty on specified plastics and articles thereof : In exercise of the powers conferred by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the Notification of the Government of India, in the Ministry of Finance (Department of Revenue) No.132/86 Central Excises, dated the 1st March 1986, the Central Government hereby exempts goods of the description specified in column (3) of the Table hereto annexed, and falling under Heading Nos. or sub-heading Nos. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as are specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in the Schedule, as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) of the said Table, subject to the conditions, if any, laid down in the corresponding entry in column (5) of the said Table. S.No Heading No./Sub Heading No. Description of goods Rate Condition 01 24 39.15 Waste, parings and scrap of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of foaming (first stage waste) is not marketable and, therefore, not excisable and in this connection he referred to the letters addressed by the assessees to Central Excise authorities regarding disposal/removal of accumulated stock of waste, parings and scrap of flexible PU foam and to the letter dated 13-7-1990 from the Assistant Collector, Gurgaon, to the Superintendent, Dharuhera, confirming the visit of Additional Collector, Dharuhera to the assessees factory wherein he noticed a huge quantity of waste in the form of solidified waste which could not be marketed. He also referred to the stock verification dated 4-9-1990 conducted by the Range Officers which would confirm that the 17518 kgs of solidified waste was lying inside the assessees factory, in support of this plea, however, as rightly pointed out by the learned DR, this is a plea which has been raised for the first time before the Tribunal and requires factual verification as to whether the duty demand in the present cases has been raised and confirmed on the above mentioned type of waste i.e. solidified waste and, therefore, cannot be considered at this late stage. Now let us examine the applicability of Notificatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dule or the additional duty leviable under the Customs Tariff Act, 1975 (51 of 1975) as the case may be, has already been paid. The Tribunal took the view that the said intermediate product can be said to be an input on which duty of excise leviable has already been paid since it was exempt by virtue of Notification 202/88. In coming to this conclusion, the Tribunal relied inter alia upon the Patna High Court decision in the case of Tata Yodo Gawa Ltd. and another v. Union of India and others reported in 1987 (32) E.L.T. 521. 9.2 The present case is distinguishable from that of Machine Builders v. Collector of Central Excise reported in 1996 (83) E.L.T. 576 in which the issue related to availment of Modvat credit on inputs used in the manufacture of final products. In that case the assessees sought to avail Modvat credit on the strength of deemed credit orders issued by the Central Government under the second proviso to Rule 57G(2) of the Central Excise Rules, 1944, which inter alia stipulates that no credit shall be allowed, if such inputs are clearly recognisable as being non-duty paid or charged to nil rate of duty. The assessees contention that even if the input is wholly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ported in 1996 (81) E.L.T. 3 in which the facts are entirely different as seen from para 4 of the judgment. The Apex Court was concerned with the interpretation of Notification No. 106/88, dated 1-3-1988 amending Notification 69/86, dated 10-2-1986 containing the condition that (b) no credit of duty paid on the goods (a)(ii) above, used in their manufacture has been taken under Rule 57A of the said Rules. The Notification was applicable to copper winding wires subject to the condition that they were manufactured out of copper wire bars of over 6 mm on which no Modvat credit had been taken. The dispute arose because some of the inputs on which Modvat credit had been availed, had been used in the manufacture of final products which were totally exempt from payment of duty. The Supreme Court held that since copper wires manufactured by the appellants had become duty free, there is no question of any adjustment of the credit amount against the duty payable on these copper wires. Moreover, 57C specifically provides that credit of duty cannot be allowed if final products were exempt from payment of excise duty. The appellants reversed credit entries on duty paid on inputs which were ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ided they are goods or are deemed to be manufactured products according to some provision. The material in question is a waste material and waste material is not considered as goods unless it can be shown that it is a commodity covered by a tariff entry and/or there is a Chapter Note or a Section Note treating it as deemed goods or declaring the process during which it arises as a process of manufacture; and (even otherwise), a notification can concern itself only with an excisable product. 16. In the present case, we are concerned with two types of wastes - regarding one which arises during the process of manufacture of Polyurethane Foam and another which arises after the foam has been formed but before the final products achieve marketable condition. The appellants have claimed in the case of first category that it is not marketable at all and therefore, cannot be considered as excisable goods or a commodity known to the market. I find in this connection that the Department has not shown that this contention of the appellants was, in any way, wrong and the material was being marketed as such. No technical or commercial literature or no report of market enquiry, if any, has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of opinion between Hon ble Member (Judicial) and the Vice President, the matter is submitted to Hon ble President for referring it to a Third Member on the following points :- 1. Whether waste of two types was generated - one, which was non-excisable and other which was excisable? 2 In case of the quantity found excisable and classifiable under Heading 39.15 whether Notification No. 53/88 or 54/88 was applicable? 3. What was the right course of action in case of material which was destroyed? 4. Whether any penalty was imposable? If so, whether it was justified? Sd/- (Jyoti Balasundaram) Member (J) Sd/- (S.K. Bhatnagar) Vice President 19. [Order per : J.H. Joglekar, Member (T)]. - I have heard Shri Navin Mallick, ld. Advocate and Shri Satnam Singh, ld. S.D.R. on the questions referred to me. My findings thereupon are as follows : 20. Q. 1. Whether waste of two types was generated - one, which was non-excisable and other which was excisable? 21. In paragraphs 5 and 6 of the order of the Member (Judicial), the manufacturing process has been described and it has been observsd that waste arose at two stages. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad seen the manufacturing process. He also pointed out that the Assistant Collector s letter dated 13-7-1990 refers to the Additional Collector s visit in which he had noticed solidified waste in huge quantity, which was apparently not marketable. Vide this letter, the Supdt. was asked to undertake inspection and also weighment of the waste vide another letter dated 16-8-1990. 26. As against the repeated submissions by Shri Mallick, I find that from the order in classification the Assistant Collector had not only noticed the solidified waste, but also the waste arising at a later stage. The last line in the following paragraph makes it clear : It has been further explained by the party that waste, parings scrap of P.U. foam is obtained at two stages i.e. first at the stage of foaming and the second at the time of cutting of blocks. At the time of foaming, the chemicals have to be minutely measured, even a slight mistake causes a lot of problems and thus the foam turns into waste. As it is a continuous process, the defect is not known at early stages and at times from one minute of foaming or five minutes of foaming tells its defects by then also quite a bit of foam is wasted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid, the ld. Member (Judicial) has relied upon the Tribunal judgment in the case of Maruti Foam (supra), where the expression already paid has been equated with ought to have been paid . In this judgment, it was held that top skin, bottom skin and side skin cut from PU foam blocks merited coverage under Notification 53/88. The situation in the case on hand is different, inasmuch as the PU foam block itself is rendered as waste. However, there is no need to interpret the wording arising out of in the parent/child sense. This phrase would cover the situation where the product itself transforms into waste. 32. Therefore, in the event of duty being attracted, I agree with the Member (Judicial) that Notification No. 53/88 is applicable. 33. Q. 3. What was the right course of action in case of material which was destroyed? 34. In the order of the Member (Judicial), there is no reference to this aspect. The impugned order does not discuss this issue. The show cause notice does not make a reference to any destruction of waste. In the appeal memorandum, however, the claim is made that the goods were cleared for destruction since they were not marketable and, therefore, the dem ..... X X X X Extracts X X X X X X X X Extracts X X X X
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