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TMI Blog2023 (12) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... Reliance Industries Ltd. for being further use in manufacture of the finished goods by M/s Reliance Industries. 2.2 It was alleged that processes of flaking/grinding of used PET bottles and washing of flakes do not amount to manufacture as defined under Section 2(f) of Central Excise Act and was also not one of the declared product as manufactured under Section 2(f) of the Central Excise Act. Revenue was of the opinion that the process amounting to manufacture and were subjected to nil rate of duty and the finished products were subjected to nil rate of duty as per Notification No.24/2012-CE dated 08.05.2012. Accordingly, the benefit claimed by the respondent in terms of Notification No.08/2005 would not be admissible to them. Accordingly, a show cause notice was issued to the respondent asking them to show cause as to why- "a) Service Tax, Ed. Cess and Secondary & Higher Ed. Cess, total amounting to Rs.52,46,844.00 should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994 along with interest payable under Section 75 of the Finance Act, 1994; and Late fee under Rule 7C of the Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable 2.3 In the instant case, the party is supplying 'PET Flakes' to the Principal Manufacturer i.e. M/s Reliance Industries Ltd, who are utilising the same for manufacture of 'Polyster Staple Fibre' & 'Tow Polyster' falling under Chapter Heading No. 55 of the First Schedule to the Central Excise Tariff Act, 1985. 2.4 Vide Notification No. 24/2012-CE dated 08.05.2012 items falling under Chapter 54 & 55 of First Schedule to the Central Excise Tariff Act, 1985have been notified for 'Nil' rate of duty. 2.5 Consequently, the final products i.e. 'Polyster Staple Fibre' & 'Tow Polyster' (i.e. Items of Chapter 55 of the First Schedule to the Central Excise Tariff Act, 1985) being manufactured by the Principal manufacturer, utilizing the impugned 'PET Flakes' produced by the party cannot be construed to have been cleared by M/s Reliance Industries Ltd. upon payment of 'appropriate duty of Excise', as defined in the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es into PET Flakes and/ or washing of PET flakes. It is noticed that if the prosess of conversion of waste bottles into PET flakes is viewed as amounting to manufacture then the noticee are eligible to exemption under serial No 78 of Notification No 4/2006-CE dated 01.03.2006. Alternatively, if this process is not viewed as amounting to manufacture then the noticee are eligible for exemption from Service Tax under Notification No 8/2005-ST dated 01.03.2005. In view of the above discussion I hold that the processing of waste PET bottles into PET flakes does not amount to manufacture as the process of crushing, cutting and washing of waste PET Bottles does not result in emergence of a new distinct and identifiable product. Consequently the noticee would be entitled to the benefit of exemption from Service Tax under Notification No 8/2005-ST dated 01.03.2005 and the demand of Rs 52,46,844.00 is liable to be dropped being non sustainable in law." 4.3 The only ground which is raised by the revenue to counter the findings recorded by the Commissioner in the impugned order is that Polyester staple fiber/polyester Staple yarn was attract nil rate of duty as per exemption Notification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided by the client; or Explanation. - ........ (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes services as a commission agent, but does not include any activity that amounts to "manufacture" of excisable goods. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) "Commission Agent" ....... Respondent has before the Commissioner, contended that the activities undert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reprocessed in India out of the scrap or the waste of goods falling within Chapters 39, 54, 55, 56, 59, 64, 84, 85, 86, 87, 90, 91, 92, 93, 94, 95 and 96 Explanation. - For the removal of doubts, it is hereby clarified that nothing contained in this exemption shall apply to plastic materials reprocessed in a free trade zone, a special economic zone or a hundred per cent export-oriented undertaking and brought to any other place in India 5.2 From the facts on record, it emerges that appellant in their reply dated 23-4-2010 to the SCN have informed that waste PET bottles are crushed and washed using mechanical force and converted into "flakes" which are then cleared to other manufacturers, who convert it to powder and cleared to manufacturer of PET bottles; that the buyer of the product who converts the "flakes" to powder form is not paying Central Excise duty; that the product waste PET bottle flakes and waste PET bottles in powder form are the two stages of conversion of used and waste PET bottles into a new PET bottle for fresh usage; that since flakes are converted into PET bottles, they are inputs for such manufacturers and are classifiable under CETH 3907.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 1,013 millibars when a reduced pressure distillation method is used (Headings 3901 to 3902); (b) resins, not highly polymerised, of the coumarone-indene type (Heading 3911); (c) other synthetic polymers with an average of at least 5 monomer units; (d) silicons (Heading 3910) (e) resols (Heading 3909) of other prepolymers. 5.7 Discernably, the appellants are not doing any chemical synthesis or polymerization processes on the PET bottles used by them as raw material. On the other hand, the process involves only putting the used PET bottles into a crusher which makes them small pieces and subjecting the resultant goods to washing and packing after which they are cleared from the factory. Though the appellant has argued that they are manufacturing "flakes", in our view, what is being manufactured is only "parings" of PET bottles. True, these "parings" eventually get converted into new PET bottles, however that will not make the final product of the appellant eligible for classification as "primary form of plastic". The "flakes" which are included as "primary form" in Note 6 of Chapter 39 will surely have to be a 'primary grade material". This is certainly not the case her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... primary form. As per Chapter Notes No. 3 to Chapter 39 under Section VII of Central Excise Tariff clearly stated that - Headings 39.01 to 39.11, apply only to goods of a kind produced by chemical synthesis. As per point No. 1 of the General Rules for the interpretation of the schedule "for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter notes." The Tariff Heading 3915 applies to Waste, parings and scrap of plastics; the sub-headings 3915 90 42 applies to Waste, parings and scrap of pet bottles; The word 'of' in sub-heading has to be given its due importance. The cleaned and crushed pet bottles cannot be considered as PET [Poly Ethylene Terephthalate) in primary form and can be considered only as parings and scrap of pet bottles. Hence, I intend to conclude that the materials manufactured by M/s. SRP by cleaning and crushing of used pet bottles is rightly classifiable under Tariff Heading 3915 90 42." Thus we find that tribunal has held that the processes under taken by the respondent do amount to manufacture and leads to emergence of the finished goods which are exempted from payment of Central Ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inition of man-made fibres for the purpose of bringing the same within the ambit of the First Schedule of the CETA. It gives an exhaustive and self-contained/self-defined, definition of the man-made fibres. Nothing can be subtracted or added to this definition and for bringing the "man-made fibres" within the scope of the First Schedule of the CETA, the processes detailed in this Chapter note, must be undertaken by an assessee. Therefore, even if it is taken for sake of arguments that the fibres manufactured by the assessees in the case in hand falls within the definition of 'goods' but being not covered under the First Schedule as observed above, they cannot be saddled with the duty liability. The view taken by the learned Commissioner (Appeals) after having regard to the Chapter Note 1 of Chapter 54, for excluding the fibres manufactured by the assessees from Chapters 54/55 of the Tariff, in our view, is perfectly valid and no fault can be found with it. Therefore, the impugned order passed by him is upheld." 4.5 Subsequently Board vide Circular Number 929/19/2010-CX dated 29.06.2010 issued a 37B Order Clarifying as follows: 2. It has been brought to the notice of the Board ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs (for example, cellulose) to produce polymers such as cuprammonium rayon (cupro) or viscose rayon, or by chemical modification of natural organic polymers (for example, cellulose, casein and other proteins, or alginic acid), to produce polymers such as cellulose acetate or alginates. The terms "synthetic" and "artificial", used in relation to fibres, mean: synthetic: fibres as defined at (a); artificial: fibres as defined at (b). Strip and the like of heading 5404 or 5405 are not considered to be man-made fibres. The terms "man-made", "synthetic" and "artificial" shall have the same meanings when used in relation to "textile materials" . 7. Thus manmade fibre can be obtained either starting from monomers or from polymers itself. The process of manufacture is not determinative of the classification of the manufactured product. What is essential for determining the classification is the nature of the end product and the market understanding of the said end product. In the present case there appears to be no dispute with regard to the nature and commercial understanding of the product viz Polyester Staple Fibre. 8. As per technical literature uses of Polyester Fibre are as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioners in this regard. The situation, we think, can be redeemed by giving two directions. Firstly, the Revenue authorities will examine the contentions raised by the petitioners without being influenced or treating the circular as binding. The Revenue/adjudicatory authorities will independently apply their mind and take into consideration the decision of the Tribunal in GPL Polyfils Ltd. (supra). They will also examine whether the said decision is applicable or state if they feel that there are good grounds and reasons (i.e. just cause) why the said decision should not be applied and questioned in appeal etc. The circular will be read as a guideline and not a binding mandate. Secondly, the petitioners can be protected by ensuring that in case the authorities hold that the decision in GPL Polyfils Ltd. (supra) is not to be applied even if facts are similar, then the demands should not be recovered by adopting coercive measures till stay applications are decided by the CESTAT. This direction is necessary, as a piquant situation has been created by the Revenue. Equities have to be balanced. The earlier decision of the CESTAT in GPL Polyfils Ltd. (supra) should be given due regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and ending with the date on which the Finance Bill, 2012 receives the assent of the President (hereafter in this section referred to as the "specified period"), shall be deemed to be, and always to have been, for all purposes, as validly and effectively taken or done as if the amendment made by sub-section (1) had been in force at all material times and, accordingly, notwithstanding any judgment, decree or order of any court, tribunal or other authority - (a) all duties of excise levied, assessed or collected during the specified period on such goods shall be deemed to be and always to have been, as validly levied, assessed or collected as if the amendment made by sub-section (1) had been in force at all material times; (b) recovery shall be made of all the duties which have not been paid, but would have been paid had the amendments made by sub-section (1) been in force, within a period of thirty days from the date on which the Finance Bill, 2012 receives the assent of the President and in the event of non-payment of such duties of excise within the said period, interest at the rate of twenty-four per cent, per annum on the amount of such duties in addition to the amount of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (both days inclusive) (1) (2) (3) (4) (5) "2C 54 or 55 (1) Polyester staple fibre or polyester filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles. (2) Tow manufactured and captively consumed within the factory of its production for the manufacture of goods specified in entry (1) Nil Nil - - 4.10 In case of Capitol Fibres P. Ltd [2017 (346) E.L.T. 495 (Tri. - Mumbai)] tribunal followed the decision in case of G P L Polyfils and held as follows: 12. It is also an admitted fact that the final product manufactured by the appellant is not obtained by the process mentioned in Chapter Note 1 to Chapter 54 of Central Excise Tariff Act, 1985. Therefore, we have no hesitation to follow the decision of GPL Polyfils Ltd. (supra) to hold that the finished goods manufactured by the appellant does not fall under Chapter 54 or 55 of the Central Excise Tariff Act, 1985. In these circumstances, we hold that for the period 1-11-2009 to 28-6-2010 as proposed by the ld. AR, the demands are not sustainable. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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