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TMI Blog1998 (3) TMI 626X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 1991 to Feb. 1992, it was observed that the appellants had cleared broken PSC Poles without issue of GP-1, without payment of duty and without mentioning the broken PSC Poles in the relevant RT-12 returns. The Department alleged that these broken PSC Poles should have paid duty. Enquiries were conducted to ascertain as to whether the said goods namely, broken poles came into existence during the test or otherwise. It was also noticed that no waste was indicated in past during the course of manufacturing process and this breakage was generated during test. In the C/List filed by the appellants, the broken poles were claimed to be non-excisable. It was also noticed that the appellants were availing Modvat credit of duty paid on raw material supplied by G.E.B. Accordingly a show cause notice was issued to the appellants on 26-6-1992 asking them to explain as to why Central Excise duty should not be demanded from them and why penalty should not be imposed on them. 3. In reply to the show-cause notice, the appellants submitted that broken poles are not goods; that they are not manufactured in the factory; that broken poles are not used for production or manufacture of excisable goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by him, the ld. Constt. prayed that the appeal may be allowed. 5. Shri A.K. Agarwal, the ld. SDR appearing for the respondent submitted that the entire case is to be seen in the light of the factual position; that the appellants have utilised Modvat credit in the clearance of finished product; that even if broken poles are treated as waste, they are liable to pay duty under clear provisions of Rule 57(3) and (4). Reiterating the findings of the ld. Collector (Appeals), the ld. SDR submitted that in view of the clear legal position, the impugned order may be upheld and the appeal may be rejected. 6. Heard the submissions of both sides. We find that the appellants in this case have cited and relied upon the judgment of this Tribunal. In the judgment in the case of CCE, Indore v. PSC Pole Factory, we find that the facts were different and the issue was whether breaking, scraping and defective cement poles amount to manufacture and whether duty was chargeable whereas in the instant case, we find that waste as arisen out of the finished product when Modvat credit was taken on the inputs that went into the manufacture of these finished products and therefore, the ratio of the judgme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in case defective, bents or sub-standard poles described as waste or scrap are cleared, then duty shall be payable. We find support from the decision of the Tribunal in the case of Hindustan Scientific Glass and Fancy Glassware Works Another v. CCE, Kanpur reported in 1985 (21) E.L.T. 195 in which this Tribunal held that Bhagar is different from its raw materials, namely silica sand, soda ash and chemicals. Labour and energy have been employed in bringing about the transmission from raw materials to Bhagar or glass. Among the per sons dealing in it, it is known and described as broken glass, waste glass etc. We also find that Hon ble Allahabad High Court in the case of Oudh Sugar Mills Ltd. v. U.O.I. and others reported in 1982 (10) E.L.T. 937 had held that by-product and are also liable to duty. We also observed that the Tribunal distinguished the judgment of the Hon ble Bombay High Court on aluminium dross and skimming. We are aware that recently the Apex Court in the case of Indian Aluminium Co. held that dross and skimming are not goods. We find that defective, bent or sub-standard poles are being sold because they have utility and cannot be termed as rubbish, tras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not selling the said broken pieces prior to December, 1991. 12. The issues for determination involved in the said case are as under :- (a) Whether broken pieces of PSC poles are to be held as marketable and hence excisable item; (b) Whether the same is waste and scrap leviable to duty in terms of provisions of Rule 57F(3) or/and 57F(4); (c) And lastly, if such waste and scrap would get the protection of Rule 57D. 13. Taking the first issue i.e. whether the broken poles can be said to be excisable goods leviable to duty of excise in terms of charging Section 3 of the Central Excises and Salt Act, 1944, I find that the said broken pieces come into exis tence at various stages during the course of manufacture of the final product and do not have the characteristics of the manufactured final product i.e. PSC Poles for transmission lines. They cannot be said to be the result of manufacture by manual labour or mechanical force. The same also do not have readymade market as nobody can be said to have manufactured broken poles for the purpose of bringing them to market for being bought and sold. It may be that depending upon the extent of damage and defect in thes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nufactured condition. 14. I also find that the Honourable Supreme Court in the case of U.O.I. and Others v. Indian Aluminium Co. Ltd. and Another reported in 1995 (77) E.L.T. 268 (S.C.) = 1995 (8) RLT 421 (S.C.), has held the aluminium dross and skimmings as not goods by laying down the proposition of law that merely because some metal is recoverable from them and the same can be sold does not make the dross and skimmings marketable. Everything which fetches some price in the market because the same might find some use cannot be said to be a marketable product. Applying the ratio of the above decision to the facts of the instant case read with the earlier decision of the Tribunal in the case of PSC Pole Factory, I find it difficult to hold the broken, damaged and defective poles as excisable goods. 15. Heading 6807.00 under which Department proposes to classify the said poles, also does not specifically cover and extend to the defective and damaged poles so as to take the same into its ambit. 16. Having concluded that the broken poles are not excisable goods leviable to duty of excise, I now examine scope of Rule 57F(3) and (4) and its applicability to the facts of the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Excise reported in 1991 (56) E.L.T. 611 (Tribunal) had held that Rule 57F(3) and (4) cannot be made the authority for charging duty on the waste, if the same is not otherwise chargeable. In view of the above decision and my discussions on the subject in the previous paragraphs, I hold that the demand of duty on the broken, damaged and defective poles was not legal. 18. Coming to the provisions of Rule 57D which creates a bar for denying or varying the credit on the ground that a part of the input is contained in any waste etc. which is exempt or chargeable to nil rate of duty. When this Rule takes about the non-denial or non-variation of credit on the ground of exemption or nil rate of duty on waste, it first presupposes the excisable character of the waste. Exemption will come only after the goods are chargeable to duty. To construe the said provision in a manner as suggested by the SDR so as to hold that the same will have application only in the circumstances narrated therein, is something not acceptable. In fact, I would say that the said Section first envisages the dutiability of the waste and then in the spirit of a relieving Section extends the benefit of Credit by layin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member (T) s view to the extent that this is not a case of a type covered by 57D as here the proposal was not for varying or disallowing the credit already taken. 27. Insofar as Rule 57F(3) is concerned it requires payment of duty even on the waste arising in the course of manufacture. 28. In this respect I agree with the views of Hon ble Member (J) that the question of payment of duty on waste would arise only if the waste was of a type which could be shown as excisable. The PSC poles have been mentioned here in both the orders as classifiable under Heading 6807.00. This heading covers: All other articles of stone, plastic, cement, asbestos, mica or of similar materials, not elsewhere specified or included . There is no section note or chapter note which declares waste of the above articles as a manufactured product or as excisable. Hence, in the absence of any specific entry or a deeming fiction or any other provision explicitly declaring such waste material arising during the process of manufacture of the articles falling under 6807.00 as excisable. The material involved in the present case is required to be treated as non-excisable and therefore non-dutiable. I therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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