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TMI Blog2019 (8) TMI 719X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacture of 'cotton yarn.' Relying upon EXIM Policy 1997-2000 and the conditions prescribed in notification no. 1/95-CE dated 4th January 1995 and no. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables and notification no. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003 pertaining to imported raw materials and consumables, proceedings were initiated against the appellant for having manufactured and cleared 'cotton waste,' to the 'domestic tariff area' at 'nil' rate of duty in which raw materials and consumables that have been procured domestically and from outside the country without payment of duty were utilized. In all these notifications, the relevant condition is 'Notwithstanding anything contained in the notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles in a user industry and such articles (including rejects, waste, scrap and remanants arising out of such production, manufacture, processing or packaging of such articles) even if not exported out of India, are allowed to be cleared outside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff as being subjected to duty of excise and includes salt. Cotton waste is specifically covered by Heading 52.02 and presently the rate of duty mentioned in the First Schedule to the Central Excise Tariff Act is nil. It is, therefore, apparent that cotton waste is an excisable goods as it finds mention in the First Schedule to the Central Excise Tariff Act and is subjected to duty which is presently 'nil'. It has been held by the Supreme Court in the case of Vazir Sultan Tobacco Company Ltd. that excisable goods do not become non-excisable goods merely because of the exemption given under the Notification. As the cotton waste is excisable goods, Second Proviso to Notification No. 1/95-C.E. is not attracted. Accordingly, we reject the Appeal filed by the Revenue.' besides which, in Clancey Precision Components Pvt Ltd v. Commissioner of Central Excise & Customs, Pune [2007 (216) ELT 242 (Tri-Mumbai)], the issue itself has been decided by the Tribunal. Further, reliance is placed on a series of other decisions of the Tribunal viz. Hanil Era Textile Ltd v. Commissioner of Central Exci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of duty arising from non-dutiability. It is clear from the decision of Aarti Industries Ltd that 'cotton waste', even though subject to nil rate of duty, is considered to be excisable. In Winsome Yarns Ltd v. Commissioner of Central Excise, Chandigarh [2001 (127) ELT 833 (Tri-Del)] the Tribunal was concerned with an identical dispute and it was held that '4. We have considered the submissions of both the sides. The 100% E.O.Us. are provided facilities, among other things, of importing capital goods, raw-material, components etc. without payment of customs duty and also of obtaining similar goods from domestic market without payment of Central Excise duty. These units have also been provided facility to sell a specified quantity of their products in Domestic Tariff Area in India. Section 3 of the Central Excise Act provides that the duty of excise shall be an amount equal to the aggregate of the duties of Customs on like goods produced or, manufactured outside India, if imported into India. It is thus apparent that the nature of duty levied on the goods manufactured by the 100% E.O.U. is Central Excise Duty whereas the measure of collection of duty is Custom duty. Section 3 (1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e circumstances, no case of diversion or use of the raw materials procured duty free for a purpose other than intended purpose, has been made out. Therefore, no valid grounds have been adduced to interfere with the findings of the Commissioner in so far as non-demand of duty on the raw materials and not taking the consequential penal action. In the decision of the Constitution Bench of the Hon'ble Supreme Court in re Dhiren Chemical Industries, reference arose in view of the conflict between the decisions in Collector v. Usha Martin Industries [1997 (7) SCC 47] and Motiram Tolaram v. Union of India [1999 (6) SCC 375] on the duty liability of inputs that were cleared without duty for use in the manufacture of final product on which duty has been paid but were utilised in manufacture of exported finished goods. In that context, and in accordance with the policy imperative behind such an exemption, the Hon'ble Supreme Court held that '6. An exemption notification that uses the said phrase applies to goods which have been made from duty paid material. In the said phrase, due emphasis must be given to the words "has already been paid". For the purposes of getting the benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so includes a ceiling on the quantity of goods that may be sold in the domestic market. A unit operating outside the scheme is subject only to the duties of excise on their finished products and there is no limit on the clearance that may be effected from the factory. The scheme of conditions in the exemption notifications under the Central Excise Act, 1944 and Customs Act, 1962 are intended to ensure that a unit operating under the scheme does not derive any unintended advantage vis-à-vis a unit operating outside by utilisation of exempted raw material and consumables. It cannot have been the conception behind the scheme to subject the waste generated by such units to a levy that is not less than that devolving outside the scheme; more so, as the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste. Hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit and does not confer any unwarranted advantage to the appellant. 12. In line with the decision of the Hon'ble Supreme Court that has examined the principle b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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