Customs, Excise and Gold Tribunal - Mumbai
Psu Pipe Coaters Private Ltd. vs Commissioner Of Customs on 6 August, 1999
Equivalent citations: 1999(66)ECC177, 2000(117)ELT478(TRI-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The appellant, at the relevant time, was engaged in coating with plastic pipes imported by a consortium which had been engaged by the Gas Authority of India Ltd (GAIL for short) for laying pipes for the Hazira Bijapur Jagdishpur Pipeline Project. The appellant was supplied the poles imported by GAIL and carried out the process of coating in its 100% Export Orient Unit (EOU for short) after obtaining permission from the department. In the appellant's factory some of plastic granules which it used to melt the coated pipe fell to the floor and got mixed up with dirt, gravel, stones and other miscellaneous materials as sweeping. In the course of the processes undertaken by the appellants some plastic waste also emerged in the form of strip. The appellant cleared both these form of goods without, apparently, issuing the gate pass required to a person for cleaning and sorting them. These goods were seized by the police for some unspecified reason and on these facts being brought to the notice of the Customs department, action was initiated on the ground that the scrap cleared was liable to duty, which has resulted in passing of the order impugned in this appeal by the Collector in which he has demanded duty from GAIL and imposed a penalty of Rs 25,000/- on the appellant under Section 112 of the act.
2. The appellant is absent and unrepresented despite notice. We have read the appeal memorandum and other papers and heard the departmental representative.
3. The Collector accepts that, out of the goods seized, the plastic strips are waste arising in the course of manufacture and hence not liable to duty in terms of Notification 13/81 which exempts goods in relation to a 100% EOU. He however finds that the sweeping are not processed waste. They are basically the raw material polyethylene granules which having fallen on the floor are mixed with dirt, chips and other such material, swept up and cleared. The notification provides in the first and second proviso that scrap or waste material arising in the course of manufacture of the finished goods in a 100% EOU are cleared on payment of duty which is to be calculated on the duty leviable on such scrap or waste had it been imported as scrap or waste provided that the percentage of the scrap does not exceed the percentage fixed by the Board of Approval for 100% EOU. The Collector has concluded that this is not such scrap arising in the course of manufacture of the finished goods. It is true that the waste material did not arise in the course of manufacture in the sense that it was not generated during any of the processes involving coating of the pipes with the plastic. It is not disputed that it was anything other than raw material. It is however possible for the appellant to have entertained a belief not unreasonable in the circumstances that the goods were in the nature of process waste. After all, the sweeping would not have arisen unless the granules were taken into the factory with the intention of using them for processes resulting the plastic being coated on the steel. It is in these circumstances that they fell to the floor and were treated as sweeping. It is therefore not entirely correct to say that this waste did not arise in connection with the processes of manufacture in the factory. We have not examined the position with regard to levy of duty. The duty, as we have noted, is demanded from GAIL, who is not before us. What is to be emphasised is that it was possible for the appellant to conclude that the goods were waste. The contention by the appellant, that in view of the specification between it and the consortium, plastic contained in the sweeping could not be used could not be rebutted by the departmental representative. It is also to be noted that the goods were cleared from the appellant's factory not to a buyer of plastic, but to a dealer in waste material. It was also noted that these goods were sent along with plastic strips which the Collector clearly accepts as waste. Taking all these aspects into account, we are of the view that imposition of penalty was not called for.
4. Accordingly, we allow the appeal and set aside the penalty.