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TMI Blog2024 (6) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... he supplier end as regards the classification of the products purchased by the respondent. It is settled law that once the classification is not challenged at the end of the seller, the same goods cannot be re-classified at the recipient end. Since respondent have not availed the exemption notification No. 4/2006-CE question of application of rule 6 does not apply. Moreover in respect of the goods respondent have admittedly paid the excise duty, once the excise duty has been paid the Cenvat cannot be denied. In the present case, serial No. 78 of Notification No. 4/2006-CE was not absolute exemption and have conditions. It cannot be said that serial No. 78 of Notification No. 4/2006-CE provides absolute exemption. In such circumstance, excise duty was therefore correctly paid by the respondent and Cenvat Credit of the inputs was also admissible. In our view Excise Duty paid cannot be appropriated under Section 11D of the Act. Demand of differential Cenvat Credit of Rs 3,12,27,981/- - HELD THAT:- Sub-rule (5)of Rule 3 of Cenvat Credit Rules 2004 applies only when the inputs which are brought into the factory is now to be removed in the same condition i.e As Such in their original con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BER (TECHNICAL), MR. RAJU APPEARANCE: For the Appellant : Shri M.G. Rayka, Additional Commissioner (AR) appeared. For the Respondent : Shri Paresh M. Dave, Advocate appeared. RAMESH NAIR All the four appeals have been filed by the revenue against the impugned Common Order-In-Original No. SIL-EXCUS-000-COM-049-52-16-17 dtd. 28.11.2016/06.12.2016 passed by the Commissioner, Central Excise, Customs Service tax, Silvasa. 2. Brief facts of the case are that the respondent had sought export of polyester waste under CETH No. 55.05 vide their letter dtd. 21.03.2013. During the course of verification of documents at the time of supervision of export consignment it was observed by the department that the product viz. polyester fibre waste/lump was not in fibrous form and same was in solid irregular size small lumps shape composed of polyester and same merited to be classifiable under CETH 39076090 of CETA, 1985. It was also observed that the respondent were procuring polymer waste falling under chapter sub heading 39076090 39159041 from M/s Reliance Industries Ltd., and were doing process like segregation/agglomeration process i.e popcorn processing, cleaning etc. on such polymer waste . All ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gregating the same by manual sorting to get Polyester Fibre Lumps/Oligomer which appeared correctly classifiable under Ch. 39079190 of CETA, 1985. Also for the period prior to 17.03.2012, the said Cenvat Credit appeared inadmissible to them as the resultant product namely Polyester Fibre Lumps/Oligomer, obtained during the manual sorting of FF Pre-Depolymer Waste (Ch 55 of CETA, 1985), was exempted from payment of whole of the Central Excise duty by virtue of Notification No. 4/2006-CE dtd. 01.03.2006. Further, Polyester Fibre Lumps/Oligomer, obtained during manual sorting of goods- viz. polymer waste falling under Ch. 39 of the CETA, 1985 remained exempted from payment of the Central excise duty by virtue of Notification No. 04/2006-CE dtd. 01.03.2006 by virtue of Notification No. 12/2012-CE dtd. 17.03.2012. Further, the resultant product obtained from these goods on manual sorting was sold by them under guise of waste of polyester staple fibre by classifying the same under Ch 55051090 of CETA, 1985. Also in ER-1 returns respondent has shown the clearances of the same as that waste of polyester Staple fibre . Accordingly show cause notice dtd. 31.12.2014 was issued to the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i.e., polymer waste classified under chapter 39 as has been correctly alleged in the show cause notice and also remains admitted by the adjudicating authority herself in her findings, they are squarely covered by the unconditional exemption under Sr. No. 78 in Notification No. 4/2006-CE dtd. 01.03.2006 read with corrigendum F.No. 334/3/2006 dtd. 01.03.2006, as amended by Sr. No. 147 of Notification 12/2012-CE dtd. 17.03.2012. 5. He also submits that the finished goods viz. Polyester Waste (Pop Corn) and Polyester Waste (Oligomer/mixed POY/mixed textured) being fully and unconditionally exempted goods by virtue of Sr. No. 78 in Notification No. 4/2006-CE dtd. 01.03.2006 read with corrigendum F.No. 334/3/2006 dtd. 01.03.2006, as amended/superseded by Sl. No. 147 of Notification No. 12/2012-CE dtd. 17.03.2012, in terms of the Cenvat Credit Rules, 2004, the assessee were not entitled to avail cenvat credit of the duty paid on the raw materials. Therefore the Ld. Commissioner ought to have confirmed the recovery of the Cenvat Credit wrongly availed on their raw materials, alongwith consequential interest/penalty. 6. He further submits that the adjudicating authority ought to have confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of central excise duty on the finished goods i.e., usable Polyester Staple Fibre, allegedly cleared in the guise of clearances of residual waste of polyester staple fibre at Re. 1 per Kg. to the non-existent buyers/ individual buyers, he submits that the Ld. Commissioner has pointed out the deficiencies in the investigation and she has held that without any evidence the allegation of clandestine clearance by the respondent in the guise of residual waste is not sustainable and has dropped the demand thereon. However the details of investigation and statement of the vehicle owners recorded during the course of investigation are mentioned in show cause notice by which it is clearly appeared that the clearances of waste of Polyester Fibre at Re. 1/Kg, shown by Respondent to various individuals, were fake. Especially when the investigation officers had collected so much of evidences from various independent witnesses such as RTO authorities, vehicle owners whose vehicle were claimed to have used in transportation of the impugned goods etc, and when the same shown to Shri Vipul Gupta, GM of the respondent, his act of refraining from explaining the fact at the time of recording his state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 78 of Notification No. 4/2006-CE was not an absolute exemption, but it was a conditional exemption; the condition being that the goods specified under col. (2) of the table were production in India out of the scrap or the waste falling within the specified chapters. If the goods specified under Col. (2) were not reprocessed in India out of the scrap or the waste of goods specified under Col.(3), then nil rate of duty was inadmissible. The exemption was thus conditional, depending upon the inputs/ raw materials used for production of the goods which were exempt. Therefore, the respondent was even otherwise not under a legal obligation of Section 5A(1A), hence is paying excise duty on their final products, and accordingly cenvat credit of inputs was admissible. He placed reliance on the following judgments. (i) Hicure Pharmaceuticals Pvt. Ltd. Vs. CCE, Belgaum 2024 (1) TMI 669 (ii) Macleods Pharmaceuticals Ltd. Vs. CCE ST -2023 (7) TMI 360 CESTAT, Ahmedabad. (iii) Macleods Pharmaceuticals Ltd. Vs. CCE ST -2024 (1) TMI 387-CESTAT, Ahmedabad. (iv) Rainbow Papers Ltd. -2023 (10) TMI 288. 12. He further submits that it is found by the Commissioner on the basis of evidence including a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch. 15. He also submits that the activities/ process of testing and quality checking and packing the products for sale are considered to be manufacture because these activities/process render the goods marketable. In the present case, assuming without admitting that only manual sorting for separating good quality materials and removing impurities for obtaining clean waste were undertaken and the unusable waste were sold as residual waste, then also such process would constitute manufacture because apart from the sorting and segregation, final packing for selling the goods (i.e good quality clean waste as well as the residual waste) was also carried out by the respondent for rendering the goods saleable. He placed reliance on the following judgments. (i) Baccarose Perfumes Beauty Products Ltd. 2006 (194) ELT 310. (ii) Dy. Commissioner Vs. Baccarose Perfumes Beauty products Ltd. 2010 (257) ELT 177 (Guj.) (iii) Commissioner Vs. Baccarose Perfumes Beauty Products Ltd. 2016(338) ELT A 236(SC). 16. He also argued that it is a settled position that even if both the raw materials as well as the final products were classified in the same Tariff heading, still the final product can be consi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oval of waste products by the Respondent in guise of residual waste cannot be considered as proved beyond a reasonable doubt. He heavily relied upon the decision of Arya Fibers Pvt. Ltd. Vs. CCE, Ahmedabad II 2014 (311) ELT 529 (Tri.- Ahmd.) 19. He also submits that there is no evidence for proving that the goods under these invoices were actually usable polyester waste like Pop corn; but it is only the assumption of the revenue that the goods must be usable waste because the buyers were not found at the addresses shown in the invoice. There is no evidence for showing that the Respondent actually received a higher price for such residual waste, and no evidence like any jottings or recording in diaries or note books of receiving unaccounted money as price of clandestinely removed goods is found, and the Respondent s employees have also not stated that usable waste in guise of residual waste was removed or about receiving unaccounted money towards price of clandestinely removed goods. Only on assumptions or presumptions or doubts, a case of clandestine removal cannot be made against the assessee. The entire basis of the Revenue s case is that the Respondent s employee could not expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 915. In this regard, it is the revenue s case that when the Commissioner has held that polyester waste was classifiable under Tariff heading 39079990 as other polyester in primary form, then exemption under Sl. No. 78 of Notification No. 4/2006-CE was inadmissible, because waste purchased by the Respondent were also classifiable under same chapter heading 3907 and chapter 39 was specified in column (3) against Sl .No. 78 of the raw materials. In this regard we observed that all type of waste purchased by the respondent were generated by the suppliers during production of textiles fibers, textiles yarns. The suppliers have classified such waste under Tariff heading 55051090 and paid excise duty accordingly. However in the present matter revenue try to re-classify the product under different chapter heading. To our mind this proposition of the law is incorrect. The assessee/respondent purchased the disputed raw materials from their suppliers and suppliers had classified their final products as per the classification indicated on the invoices. There is no dispute at the supplier end as regards the classification of the products purchased by the respondent. It is settled law that once ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that above exemption entry carry conditions, therefore there is no doubt that the disputed exemption entry are conditional. The contention of the Revenue is based on the Section 5A (1A) which prescribes that in case of absolute exemption the asseessee has no option except to avail such exemption. In the present case, as discussed above, the exemption entry are subject to certain conditions therefore in this position respondent was not under a legal obligation of Section 5A (1A) and accordingly Cenvat Credit of Inputs were admissible. 24. The Revenue s other contention is that as per Section 5A (1A) of the Central Excise Act where an exemption in respect of any excisable goods from the whole of duty of Excise leviable thereon has been granted absolutely, the manufacturer of such excisable goods cannot pay the duty and since for the clearance of disputed goods duty prescribed is nil as per above notification, the respondent -assessees are not required to pay the duty and whatever duty they have paid is to be recovered from them under Section 11D of the Central Excise Act. The relevant portion of Section 5A is reproduced below:- Section 5A. Power to grant exemption from duty of Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f polymer in different form, and the finished goods was also waste of Polymer /so called residual waste which remained exactly the same even after the processes, and hence there was no manufacture involved. By such processes, the assessee was only removing foreign materials i.e. unusable waste of polymers from goods complete in themselves and/or processes which clean goods that were complete in themselves i.e usable polyester and staple fibre. The Ld. Commissioner has erred in holding that the assessee had not cleared any raw material as such. We find that the process of conversion of waste input into staple fibre involves a number of manufacturing processes like segregation, cleaning, drawing, crimping, popcorn processing, packing and testing for qualities and in the course of conversion many intermediate products, by-products and residual products emerge. The products so separated have now obtained as separate and new identity in the market terms and distinctly different from the waste input received. Further we have also gone through the finding recorded by the Ld. Commissioner in this regard, in the present disputed matter Ld. Commissioner after scrutiny of the relevant Invoice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e respondent. We find that in this regard the revenue and investigation team has not brought out any concrete and tangible evidences in support of the allegation that the Respondent had cleared the Polyester Staple Fibre clandestinely in the guise of waste of polyester fibre (residual waste). It is well settled law that allegation of clandestine removal is required to be arrived at on the basis of sufficient and positive evidence and the onus to prove such allegation is on the revenue. We find that in the impugned matter revenue has not interrogated any single buyer of the alleged cleared Polyester Staple Fibre clandestinely in the guise of waste of polyester fibre (residual waste). There is no evidence to prove that the goods under these invoices were actually usable polyester waste. There is no evidence by which it can be proved that respondent actually received a higher price for such residual waste. Further we have also gone through statement of respondent s employees wherein he has also not stated that usable waste in guise of residual waste was removed, or received any unaccounted money towards price of clandestinely removed goods. We find that in the present matter revenue h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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