Customs, Excise and Gold Tribunal - Mumbai
Asian Cables And Ind. Ltd. And Ors. vs Cce on 17 May, 2002
Equivalent citations: 2002(104)ECR736(TRI.-MUMBAI)
ORDER Gowri Shankar, Member (T)
1. The appeal is against the order of the Commissioner (Appeals) demanding duty on the waste of plastic (waste or scrap of plastic) described as spews generated in the factory of Asian Cables and Industries Ltd. in the course of manufacture of PVC electric cables in terms of Sub-rule (5) of Rule 57F, imposing a penalty on this appellant for its failure to pay duty, and imposing penalties under Rule 209A on R.D. Matkar, Prem Kumar and A.V. Ajgaonkar, its employees.
2. The contention of the manufacturer was, and continues to be, that the provisions of Sub-rule (3) of Rule 57F, permitting removal of inputs as such or after being partially processed, for repair, reconditioning etc. and return to the factory for being used as inputs by it (in the manufacture of the final product) would be available. The counsel for the appellant draws our attention to the decision of the larger bench of the Tribunal in Wyeth Laboratories Ltd. and Ors. v. CCE, Bombay and Ors. 2000 (39) RLT 745 : 2000 (92) ECR 474 (T-LB). He says that the ratio of this decision would apply to the plastic waste under consideration and it will have to be held, not scrap liable for clearance on payment of duty in terms of Sub-rule (5) of Rule 57F but partially processed goods which could have been removed without payment of duty under Sub-rule (2). He also draws our attention to the decision of the Chennai bench of the Tribunal in Aqua-Vin Pipes Pvt. Ltd. v. CCE, Chennai 2001 (44) RLT 300 : 2001 (97) ECR 106 (T) and in Techno Cables Pvt. Ltd. v. CCE, Hyderabad 2001 (44) RLT 183 : 2001 (97) ECR 101 (T) limiting the ratio of the larger bench's decision applicable only to metal scrap. He contends however that this is clearly wrong, and there being no basis for this view in the decision of the larger bench. He also says that the same Chennai bench of the Tribunal has applied the ratio of the larger bench's decision to plastic material in its decision in Arham Plastics Ltd. v. CCE, Chennai 2001 (95) ECR 383.
3. The departmental representative emphasises the reasoning contained in the two decisions of the Chennai bench, which the counsel for the appellants seeks to distinguish.
4. The larger bench, by majority of three to two, held as follows:
(d) Commercial prudence and technological feasibility would induce a manufacturer to reconvert, reprocess, recondition and otherwise deal with intermediate goods, by-products, scrap, refuse, waste etc. to obtain maximum targeted production of the final product by utilising the facilities available in his premises or by sending them out on job work to other places. Only when final product is no longer profitable or technologically possible, a manufacturer would treat such resultant stage of by-product, refuse, scrap to be no longer useful and therefore a waste. In this view the word "waste" used in Rule 57F(4)(which corresponds to Sub-rule (2)] Rule 57F(5) has to be understood to denote a form of inputs after partially, full or reprocessing could not in a technologically/commercially feasible manner be converted to a final product or desired to be converted further. Thus what would be 'waste' for a manufacturer, may not be a 'waste' in the case of another manufacturer, even in the case of same kind of goods. It is significant to note, that while Rule 57D talks of three stages, i.e. waste, refuse or byproduct, Rule 57F(4) only talks of waste. Therefore, it appears, that the framers of the rules have used the word 'waste' in Rule 57F(4) to be understood in a limited fashion; this has to be restricted to such converted inputs which are not be desired to be used any further, for use, in or in relation to the manufacture of the final product."
e) Once we give such a meaning to the words 'waste' occurring in Rule 57F(4), then inputs, semi processed, fully processed or converted into any other stage or further form, called by any name, would be covered by the provisions of the Rule 57F(2) used, inside or outside the modvat credit availcrs facilities i.e. on job work, provided job work procedures are followed, such movements would be permissible as long as the manufacturer availing the modvat desires. Rule 57F(2) proviso itself provides that whatever cannot be processed any further on job work, under Rule 57F(2) would be 'waste'. Such waste would thereafter be dealt with as provided by Rule 57F(4). The rules do not impede the desire of the manufacturer to extract as much final product out of the inputs under Rule 57F(2) as possible or as desired. The procedures under Rule could be 'aborted' and recourse taken to Rule 57F(4) at stage, but only at the option of the assessee. The option to exercise the routes available between 57F(2) and 57F(4) procedures remains with the manufacturer and is not lost by a change in form of the input, due to processing.
5. The two decisions of the Chennai bench have refused to apply the ratio of this decision on their view that the larger bench decision related to "waste in regard to metal." These decisions convey a perception suggestion that the larger bench's decision relied upon the provisions of Note 8(a) to Section XV of the tariff "metal waste and scrap from the manufacture or mechanical working of metal, and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons."
6. We are not able to perceive the decision of the larger bench as being limited to metals. The portion of the order that we have quoted expressed the understanding of the member who wrote the lead order, which was followed by the majority, as to what constitutes waste. He is categorical in his finding that it is only such material which cannot be put to use again in the manufacturing process after in a kind of recycling that would be cleared as waste. There is nothing in his order to suggest or from which it can be inferred that the observation is limited to metal. The material under consideration before the larger bench was spent catalyst. The nature of this catalysts is not indicated. It might or might not have been metal or chemical or a combination of metal with other goods.
7. Apart from that, we do not see how the definition of metal scrap contained in Note 8(a) to Section XV of the tariff is relevant. This note has not been referred either in the argument or in the findings of the majority decision, although one of the members who wrote minority has based his reasoning upon it. The reasoning seems to be that it is only metal scrap which, not being usable as such that was under consideration. The definition of the term does not support this view. The definition contained in two parts. The first refers to metal waste and scrap from manufacture of mechanical working and the second to metal goods definitely not usable as such "because of breakage, cutting up, wear or other reasons." The second would cover such goods as metal containers which because of wear and tear are no longer usable as such goods and therefore have to be considered as scrap. The words "definitely not usable as such" in the definition obviously refers to these goods. They would have no application whatsoever to waste and scrap arising from the manufacture or mechanical working of metal. The basis for limiting the operation of the larger bench's order to metal scrap is not usable as such therefore falls. There is therefore no basis of limiting the applicability of the larger bench's decision to metal alone.
8. In our respectful view, the larger bench decision requires reconsideration. Rule 57F(3) apply to inputs removed as such or after partial processing. Whether scrap metal, plastic etc. which arises in the course of manufacturing involve these inputs create identity as input even as an input which has been partially processed, is in our view debatable. But for the fact that this appeal could be disposed of on limitation, we would have required reconsideration of the larger bench decision by still larger.
9. The notice issued to the manufacturer is dated 31.1.1996 and demanded duty for the clearance made between 1 March 1994 to 11 February 1995. It invoked the extended period contained in Sub-rule (2) of Rule 57I by alleging suppression of fact that these spews were waste and scrap. We are not able to find any suppression. The appellant had filed an application on 5.5.1998 and again on 25.3.1990 for sending out spews for conversion. It had declared the commodity as spewed and not given any further description. The department responded to both these applications by granting the permission. The view of the Commissioner that the assessee had misdeclared that the spews falls under heading 39.01 of the tariff which is for plastic in primary form of waste it fell under heading 39.15 of the tariff as scrap is not justified. The assessee had not, in these two applications or to the enquiries to it, mentioned any tariff heading. It only said that the product fall under chapter 39 and did not indicate any specific tariff heading. Heading 39.01 was mentioned with regard to goods arise as a result of reprocessing at the job workers premises.
10. Apart from that there was a widely held view that, such goods in fact would be treated as partially processed goods and this was the decision taken in Mumbai in Chloride Industries Ltd. v Collector . This decision was passed in 1992. A number of other decisions of the Tribunal Press N. Forge v. Collector took the same view. It is only in 1996 that the question was referred by the Chennai bench in Collector v. Mercury Fittings to the larger bench.
11. In the light of this position in law and in view of the fact that the appellant had made known to the department, more than once, its decision to clear the goods in which it did not suppress any information, we are of the view that the extended period of limitation would not apply. The demand is therefore barred by limitation and penalties could not have been imposed either on the assessee or its employees.
12. The appeals are accordingly allowed and the impugned order set aside. Consequential relief.