Customs, Excise and Gold Tribunal - Tamil Nadu
Collector Of Central Excise vs Mercury Fittings on 8 April, 1996
Equivalent citations: 1996(86)ELT285(TRI-CHENNAI)
ORDER V.P. Gulati, Member (T)
1. The issue in appeal is whether the scrap generated in the units after the inputs have been used in the manufacture of notified products can be cleared without payment of duty in terms of Rule 57F of the Central Excise Rules. Rule 57F for convenience of reference is reproduced below:-
"57F. Manner of utilisation of the inputs and the credit allowed in respect of duty paid thereon. - (1) The inputs in respect of which a credit of duty has been allowed under Rule 57A may -
(i) be used in, or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or
(ii) be removed, subject to the prior permission of the Collector of Central Excise, from the factory for home consumption or for export on payment of appropriate duty of excise or for export under bond, as if such inputs have been manufactured in the said factory:
Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such inputs under Rule 57A.
(2) Notwithstanding anything contained in Sub-rule (1), a manufacturer may, with the permission of the Collector of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products, to a place outside [the factory, -
[(a) for the purposes of test, repairs, refining, reconditioning or carrying out any other operation necessary for the manufacture of the final product or remove the same without payment of duty under bond for export, and return the same to his factory for further use in the manufacture of the final product, provided that the waste, if any, arising in the course of such operation is also returned to the said factory;
(b) for the purpose of manufacture of intermediate products necessary for the manufacture of the final products and return the said intermediate products to his factory for further use in the manufacture of the final product or remove the same without payment of duty under bond for export, provided that the waste, if any, arising in the course of manufacture of such intermediate products is also returned to the said factory]:] ' [Provided that the said waste need not be returned to the said factory if the appropriate duty of excise leviable thereon has been paid.] (3) Credit of specified duty allowed in respect of any inputs may be utilised towards payment of duty of excise, -
[(i) on any of the final products in or, in relation to the manufacture of which such inputs are intended to be used in accordance with the declaration filed under Sub-rule (1) of Rule 57G; or] [(ii) on the waste, if any, arising in the course of manufacture of the final products; or
(iii) on the inputs themselves of such inputs have been permitted to be cleared under Sub-rule (1):] [Provided that the credit of specified duty in respect of inputs used in the final products cleared for export under bond or used in the intermediate products cleared for export in accordance with Sub-rule (2), shall be allowed to be utilised towards payment of duty of excise on similar final products cleared for home consumption or for export on payment of duty and, where for any reason, such adjustment is not possible, by refund to the manufacturer subject to such safeguards, conditions and limitations as may be specified by the Central Government in the Official Gazette :] Provided further that no such refund of credit of duty shall be allowed if the manufacturer avails of drawback allowed under the Customs and Central Excise Duties (Drawback) Rules, 1971, or claims rebate of duty under Rule 12A, in respect of such duty.] (4) Any waste, arising from the processing of inputs, in respect of which credit has been taken may -
(a) be removed on payment of duty as if such waste is manufactured in the factory; or
(b) be removed without payment of duty, where it belongs to such class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed; or
(c) be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use, or not worth the duty payable thereon, the duty payable thereon being remitted :
Provided that such waste may be destroyed by the manufacturer governed by Chapter VIIA after informing the proper officer in writing regarding the quantity of such waste and the date on which he proposes to destroy, at least seven days in advance and after observing all such conditions as may be prescribed by the [Collector of Central Excise] by a general or special order with regard to the manner of disposal of such waste.
(5) No part of the credit of duty allowed shall be utilised save as provided in Sub-rule (3).
[(6) On an application made by a manufacturer, the Collector may, subject to such conditions and limitations as he may impose, permit a manufacturer having credit in his account in form RG 23A and lying unutilised on account of shifting of the plant or factory, belonging to the manufacturer, to another site, to transfer the credit in the account aforesaid to such factory of the same manufacturer.]"
The ld. lower appellate authority following the ratio of the decision reported in 1993 (63) E.L.T. 633 (Tribunal) in the case of Chloride Industries Ltd. v. Collector of Central Excise, the Tribunal, West Regional Bench, has held that if the waste generated is recycled by the assessee by removing the same to the job worker for conversion into rods etc., the movement of the same would be covered under Rule 57F(2) and the scrap is to be treated as if it is an input in respect of which Modvat credit was earlier taken and if, however, the same is cleared as such for sale to customers different considerations would apply and the scrap is required to be cleared on payment of duty or otherwise as provided for under Rule 57F(4) as above. The Ld. lower authority's findings in this regards are as under:
Therefore, the short point that arises for my consideration in the facts and circumstances of the present case would be as to whether the impugned waste and scrap can be considered and treated as "inputs" so as to get qualified to be sent to the job workers and received back in the form of rods under the provisions of Rule 577(2), after the intended recycling processes. Rule 57F(4) speaks of the removal of waste and scrap arising from the processing of inputs in respect of which credit has been taken, on payment of duty as if such waste is manufactured in the factory, and does not say anything about the return of the same. In the present case, admittedly, the impugned waste is cleared from the appellant's factory to the job-worker for the intended recycling purpose, and the same is received back in the form of rod after carrying out refining, reconditioning operations by the job worker. Therefore, I am of the considered view that the movement of the impugned waste from the premises of the appellants to that of the job worker, and the subsequent return thereof in the form of rods would not be governed by the provisions of Rule 57F(4) of the Central Excise Rules, 1944, in the facts and circumstances of the case. In other words, the movement of the same can be said to be covered by the provisions of Rule 57F(2), if the impugned "waste" is considered and treated as an "input" in terms of the provisions of the said rule. As contended by the appellants Rule 57F(A) refers only to those cases where the waste and scrap are no longer useful and required by the manufacturer who disposes the same finally, whereas, in the present case, admittedly, the appellants are getting back the same in the form of rods after the recycling processes, and therefore, the movement of the impugned waste, in my considered view, has to come under the purview of the provisions of Rule 57F(2). Definitely there can be a clear line of distinction and difference in the movement of waste cleared on sale to a customer, and that removed to a job worker for the purpose of refining and reconditioning etc., and getting back in the form of "rods" after the intended recycling operations as in the present case. In the former case, as the waste is removed once and for all since the same is no longer required, the movement of the same is covered under Rule 57F(4). Whereas, in the latter case, the same is removed in order to undergo the intended processes as contemplated in Rule 57F(2) at the hands of the job worker and returned back in the form of rod, as stated earlier, and hence the movement has to be regulated under the provisions of Rule 57F(2) of the Central Excise Rules, 1944.
"Rule 57F(2) of the Rules permits the manufacturer to remove with the permission of the Collector of Central Excise, "inputs as such, or after the inputs have been partially processed during the course of manufacture of final product" at a place outside for the purpose of repairs, refining, reconditioning or carry out any other operation necessary for the final product for purpose of manufacture of intermediate product, necessary for manufacture of final products. What the appellants have been doing is to send the waste and scrap generated from the inputs during the process of manufacture for being re-converted into ingots and utilise such ingots as input. This could be taken as process of reconditioning of the inputs. No specific meaning is given to the word "recondition" for the purpose of interpretation of the Rules and hence falling back upon the dictionary meaning, in the Chambers twentieth century dictionary, the word "recondition" is shown to mean to restore to original or sound conditions and in Websters dictionary it is shown as "to restore to good condition". Waste and scrap being not a new product coming into existence but emerging as remnants of the inputs, when sent out for reconversion into ingots themselves would fall within the purview of Rule 57F(2) and provisions of Rule 57F(4) need not be resorted to. This view gets fortified by the circular No.15/89 of the Central Board of Excise and Customs where, in the identical situation arising, in relation to aluminium scrap and reconversion thereof in ingots benefit of removal under Rule 57F(2) has been given. There is no mention in the circular nor is anything brought on record to show that same special circumstances, distinct and not available to lead waste and scrap, existed requiring aluminium scrap to be treated on different pedestal.
Para 10 : Even otherwise where for the benefit is conferred on one, otherwise repugnant, thereto appears, has to be extended to the other, as there could be no discrimination against, between those similarly situated.
Para 11 : Under the circumstances the finding or the Collector that benefit of Rule 57F(2) is not available to lead waste and scrap removed for reconversion into ingots, cannot be sustained and is hereby set aside.
2. We observe that the said authority has thus held that depending upon the purpose for which the scrap is cleared will determine the levy on the scrap. The Ld. departmental representative reiterated the grounds of appeal which are reproduced below for convenience of reference :
The appellants submit that the order of the Collector of Central Excise (Appeals) is not maintainable in law on the following amongst other grounds :
(1) The Collector (Appeals) has failed to see the true scope of the Rule 57F(2). As per Rule 57F(2), a manufacturer may remove the inputs as such or after the inputs have been partially processed during the course of manufacture of final products and hence the "waste and scrap" which has arised from the processing would not be covered within the ambit of "inputs or after it is partially processed". Hence, the order of Collector (Appeals) is not correct in law.
(2) The language of a statute must receive a strict construction and there can be no room for intendment or presumption and regard must be had to the clear meaning of words. When the language of a statute is clear and unambiguous, it cannot be strained and stretched so as to nullify the effect of the provision. The Collector (Appeals) failed to see that the scrap arisen in the course of manufacture would fall within the purview of 57F(4) as it specifically relates to "any waste arising from the processing of inputs in respect of which credit has been taken" and hence clearance of such "waste and scrap" would be governed by Rule 57F(4) only.
(3) As per Rule 57F(2), only the inputs as such or after the same has been partially processed, could be sent for the purpose of reconditioning, refining etc., and not the waste and scrap. The order of Collector (Appeals) that the impugned waste and scrap is cleared from the premises to the job workers for the purpose of recycling and the subsequent return thereof in the form of rods would not be governed by the provision of Rule 57F(4), is not correct in law.
(4) Collector (Appeals) held that the Rule 57F(4) refers to only those cases where the waste and scrap is no longer useful and required by the manufacturer who disposes them finally, whereas in the present case, admittedly the appellants are getting back the same in the form of rods, after the recycling process and therefore the movement of the impugned waste has to come under the purview of provisions of Rule 57F(2). The Collector (Appeals) fails to see that waste arising are no longer useful to the manufacturer and fit for recovery of metal only and hence would be rightly governed by the provisions of Rule 57F(4). If the goods has to be sent for the purpose of recovery of metal, the right course open to the assessee is to pay duty on the waste and scrap.
(5) Though the Honourable CEGAT, W.R.B. Bombay in the case of Chloride Industries held that the waste and scrap generated during manufacturing process could be sent to job workers for the purpose of Reconditioning under Rule 57F(2), the CEGAT Madras Bench in the case of Collector of C. Excise, Hyderabad v. Nucon Industries Pvt. Ltd. -1992 (59) E.L.T. 122 (Tri.) held that Brass and zinc scrap generated in the process of manufacture of pneumatic control equipment, when removed to job worker for conversion into castings etc, has to pay duty in terms of Rule 57F(4) and hence Collector (Appeals) ought to have followed this decision. Moreover, the department has not accepted the order of the CEGAT, WRB in the case of Chloride India and a reference case petition has been filed in the High Court of Bombay, against the rejection by CEGAT, W.R.B. of the reference made by Collector of Central Excise, Pune.
3. The respondents have urged that the ratio of the decision of the 1993 (63) E.L.T. 633 (Tribunal) West Regional Bench would apply to the facts of this case.
4. We observe that the Central Excise Rules under which the Modvat scheme has been introduced constitute a self contained code providing for the items in respect of which Modvat will be available, the conditions precedent to be satisfied for the purpose of availing the Modvat credit, the circumstance under which no Modvat credit will be available, the mode of utilization of the Modvat credit, the action for payment of duty in case the inputs without being utilized are cleared from the factory, the transfer of inputs for reprocessing etc., and how the waste etc., arising as a result of inputs is to be treated and also the necessary mechanism for recovery of credit in case the same is irregularly taken or utilized. These provisions of the rules are to be interpreted on their own terms. Rule 57F(4) specifically provides for the manner in which the waste arising as a result of processing or use of inputs has to be treated for excise purposes. There are three modes for the same provided under the rule is either it has to be cleared on payment of duty or without payment of duty if it is cleared for certain notified purpose as notified or be destroyed. Once, the product obtained after the use of the input is identified as waste, in law the same can be cleared and dealt With only in the manner specifically provided for in Rule 57F(4) as above. That the waste is to be recycled does not take away its character as waste for the purpose of treatment in terms of Rule 57F(4).
By virtue of recycling of waste, it cannot acquire the status of the input for according it a differential treatment under Rule 57F(2) as held by the Ld. lower appellate authority. As it is for Central Excise purpose the input which may be metal in prime or virgin form and waste arising therefrom are specified as separate excisable commodities and excise duty purpose the prime material which in the present case is copper bars and rods fall under Tariff Heading 74.07 and the waste scrap falls under 74.04. There is therefore, no question of treating the two alike for Modvat purposes, more so in view of the specific provision under Rule 57F(4) for waste arising during the course of manufacture by the use of inputs on which Modvat credit has been taken. Wording of Rule 57F(2) under which the ld. lower authority has held that waste since it is for recycling can be treated as inputs as such, does not permit this course. The Rule 57F(2) is to facilitate the removal of the inputs as received or after partial processing of the same but not for the waste emerging at the end of the manufacturing process of the notified finished product notified under Rule 57A. We therefore, are of the view that the Ld. lower authority's view is not in conformity with the law. This Bench held the same view in our order in the case of CCE, Hyderabad v. Nucon Industries, 1992 (59) E.L.T. 122 (Tri.) and followed the same subsequently. Our findings in other cases in para 4 are reproduced below for convenience of reference :
"We observe that this is a case where one wing of the Government has allowed removal of the scrap for recycling without payment of duty and the other wing of the Government wants to nullify the effect of the instructions issued in the matter. The best course in such a situation would have been for the Department to approach the Board for issue of necessary notification exempting all the scraps generated in the country sent out for recycling in case it was the intention of the Govt. to allow removal of scraps without payment of duty. In the facts, set out above, we do not find the circumstances under which the trade notice mentioned above was issued and the provision of law under which the Department allowed clearances of the scrap duty free. We, therefore, proceed to examine the provisions of law to arrive at a conclusion whether in terms of that the benefit as allowed in terms of the trade notice issued is admissible. Rule 57F(2) under which the benefit of removal without payment of duty was allowed stipulating that the inputs in respect of which MODVAT Credit has been taken can be removed as such or after the inputs have been partially processed during the course of manufacture of the final products to a place outside factory for certain specified purposes as set out under Sub-rules (a) and (b) of Rule 57F(2). Rule 57F(2) permits only removal of the inputs as such or after these have been partially processed. Scrap generated during the course of manufacture of the inputs which have been utilised for the manufacture of finished products in the factory cannot by itself be treated as input nor as partially processed input. It, in fact, is one of the by-products generated during the course of manufacture of the finished product. Permission allowed under Rule 57F(2) therefore was misconceived. The Legislature has made specific provision for the treatment of the scrap under Rule 57F(4). The said Rule for the purpose of convenience is reproduced below:
"(4) Any waste, arising from the processing of inputs, in respect of which credit has been taken may -
(a) be removed on payment of duty as if such waste is manufactured in the factory; or
(b) be removed without payment of duty where it belongs to such class or category of waste as the Central Govt. may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed; or
(c) be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use or not worth the duty payable thereon, the duty payable thereon being remitted."
It can thus be seen that inasmuch as specific provision has been made in respect of waste arising during the course of processing of inputs in respect of which credit may have been taken, the authorities cannot have resorted to any other rule while dealing with duty aspect of the scrap except Sub-rule (4) of Rule 57F. Under this rule, the scrap can either be removed on payment of duty or it can be destroyed and it can be removed without payment of duty only when it is covered by contingency provided under Sub-rule (b) of Rule 57F(4). Admittedly, the Trade Notice No. 94/89 was issued only in respect of Aluminium scrap and this Trade Notice can be taken to have been issued at the behest of the Board or the Central Government and a claim can be made that this can be treated as an order of the Central Government for the purpose of Sub-rule (b) of Rule 57F(4). In that view of the matter in case of Aluminium, the benefit of extended interpretation of Sub-rule (b) can be given. However, in respect of brass and zinc no such trade notice or order has been issued and therefore, in terms of Rule 57F(4) the scrap has to suffer duty before it can be cleared out of the factory. We, therefore, hold that the lower appellate authority's order is not maintainable in law and we set aside the same. The appeal of the Revenue is, therefore, allowed."
5. We observe that our decision as above was not brought to the notice of the West Regional Bench when they decided the case reported in 1993 (63) E.L.T. 633 (Tribunal) Chloride Industries v. Collector of Central Excise. The Bench in that case has held as under :-
"Rule 57F(2) of the Rules permits the manufacturer to remove with the permission of the Collector of Central Excise, "inputs as such, or after the inputs have been partially processed during the course of manufacture of final product" at a place outside for the purpose of repairs, refining, reconditioning or carry out any other operation necessary for the final product or for purpose of manufacture of intermediate product, necessary for manufacture of final products. What the appellants have been doing is to send the waste and scrap generated from the inputs during the process of manufacture for being re-converted into ingots and utilise such ingots as input. This could be taken as process of reconditioning of the inputs. No specific meaning is given to the word "recondition" for the purpose of interpretation of the Rules and hence falling back upon the dictionary meaning, in the Chambers twentieth century dictionary, the word "recondition" is shown to mean to restore to original or sound conditions and in Websters dictionary it is shown as "to restore to good condition". Waste and scrap being not a new product coming into existence but emerging as remnants of the inputs, when sent out for reconversion into ingots themselves would fall within the purview of Rule 57F(2) and provisions of Rule 57F(4) need not be resorted to. This view gets fortified by the circular No.15/89 of the Central Board of Excise and Customs where, in the identical situation arising, in relation to aluminium scrap and reconversion thereof in ingots benefit of removal under Rule 57F(2) has been given. There is no mention in the circular nor is anything brought on record to show that same special circumstances, distinct and not available to lead waste and scrap, existed requiring aluminium scrap to be treated on different pedestal.
Para 10 : Even otherwise where for the benefit is conferred on one, otherwise repugnant, there to appears, has to be extended to the other, as there could be no discrimination against, between those similarly situated.
Para 11 : Under the circumstances the finding of the Collector that benefit of Rule 57F(2) is not available to lead waste and scrap removed for reconversion into ingots, cannot be sustained and is hereby set aside."
In view of the difference of views held this Bench and the West Regional Bench, the Registry should forward the papers to the Registrar for placing the same before Hon'ble President for constituting a Larger Bench.