Customs, Excise and Gold Tribunal - Delhi
M/S. Arihant Cotsyn Ltd. vs Cce, Chandigarh on 9 April, 2001
Equivalent citations: 2001(75)ECC629, 2001(130)ELT441(TRI-DEL)
ORDER
C.N.B.Nair
1. The issue involved in this appeal is the dutiability of cotton softwaste prior to the amendment of Chapter 52 of Central Excise Tariff w.e.f. 26.5.95.The issue has come before this Larger Bench on account of difference of opinion among Division Benches.
2. The relevant facts are that Chapter heading 25 was amended in the Finance Bill, 1995.The heading at it stood before and after the amendment read as under:--
Heading Before Finance After Finance Bill
Bill 1995 1995
1. 5201 Waste Yarn (Hard Waste) Cotton, Not
(including garnetted carded or
stock) combed.
2. 5202 Cotton carded or Cotton waste
combed (including yarn
waste & garnetted
stock).
3. The appellants are a 100% EOU engaged in the manufacture of cotton yarn, out of cotton.Various types of waste items arise in the processing of cotton and manufacture of yarn. Show cause notice dated 7.8.95 was issued to the appellant as to why duty should not be demanded from them in respect of waste products.The show cause notice was adjudicated by the Dy. Commissioner at Ludhiana under his order in original No.22-24/CE/DC/97 dated 16.7.97. He held that no duty was payable in respect of soft waste cleared prior to 26th May 95. In respect of the other types of waste,namely,hard waste duty demand was confirmed.Duty demand was confirmed.Duty demand on soft waste cleared subsequent to 26th May 95 was also confirmed. An appeal was filed against this order by the department before the Commissioner (Appeals), Pointing out that the order of adjudication was in error in not confirming duty demand in respect of soft waste for the period prior to 26th May, 95. The Commissioner accepted the appeal and passed the following order.
"4. I have considered the matter.I find that as per proviso to sub-section (1) of Section 3 of the to duties of Customs leviable under Section 12 of EOU cleared in DTA, as if such unit existed outside Indian. Hence,there remains no doubt that for charging CE duty, the Customs Act has to be referred to & not CE Tariff.This view is in conformity with CEGAT's decision in the case of Winsom Yarn Vs. CCE Chandigarh reported as 2000 (115) ELT 153 (T). Arguments of Adjudicating Authority hold no ground.I uphold the deptt's. view".
The present appals are against that order of the Commissioner.
4. The submission of the appellant is that duties of excise are leviable under Section 3 of the Central Excise Act and that under that section duties can be levied only in respect of "Excisable goods" which are produced or manufactured in India.They submit that soft waste arising in the processing of cotton was not "excisable" as the same was not "excisable goods" prior to the amendment of Chapter 52 w.e.f. 26th May, 95.It is their contention that excisable goods, according to the definition in Section 2(d) of the Central Excise Act means, goods specified in the first schedule to the Central Excise Tariff Act, 1985 as being subject to a duty of excise. They point out that prior to the amendment w.e.f. 26th May, 95 Chapter heading 5201 covered only "waste yarn (hard waste) including garnetted stock". They submit that this tariff entry did not cover soft waste as it was not waste yarn or garnetted stock.During the arguments of the case, leaned Counsel for the appellant took us through the adjudicating order to show that the waste in question was "flat waste, comber noils, droppings, sweepings waste of cotton". He has submitted that such waste items arose during the cleaning of cotton before spinning into yarn.He submitted that such waste could not fall in the category of garnetted stock or the waste yarn. The learned Counsel submitted that duty of excise, being leviable only in respect of excisable goods, i.e. goods specified in the schedule to Central Excise Tariff Act, cannot be levied on goods (soft waste) which are not specified in the relevant tariff heading.In this connection the learned Counsel referred to the decision of this Tribunal in the case of Vikram Ispat reported in 2000 (120)ELT 800 wherein the Tribunal held that the nature of the duty levied on the goods manufactured by 100% EOU is Central Excise duty and the measure for collection of duty is custom duty.The measure (of duty) does not alter the nature (of the levy).The learned Counsel submitted that the finding of the Dy. Commissioner that duty demand in the show cause notice was in respect of soft waste which is not specified in the Central Excise tariff has not been set aside by the Commissioner (A). He only held that duties of excise are to be charged equal to duty of custom under Section 12 of the Customs Act. The learned Counsel pointed out that the Commissioner passed the order without realising that order without realising that the occasion for levy of duty arose only if goods specified in the Central Excise Tariff was being manufactured. The Commissioner has given no finding that the soft waste in question was specified in the schedule of the Central Excise Tariff. He, therefore, submitted that the Commissioner committed an error in determining the rate of duty on the goods without first satisfying himself as to whether any duty was leviable. Moreover, the Commissioner was only following the order of the CEGAT in the case of M/s Winsom Yarns Ltd. Learned Counsel submitted that the order of the Tribunal in the case of Winsome Yarn did not constitute authority for holding that excise duty is leviable in respect of goods which are not specified in the Central Excise Tariff.He submitted that order of the Tribunal related only to the rate of duty leviable on goods manufactured in a 100% EOU and cleared for domestic consumption and not to the question raised in this appeal.
5. The learned also submitted that it is well settled that waste arising in the manufacture of goods would be leviable to duty only if such waste goods are specified in the Central Excise Tariff and not otherwise. He relied on the decision of the Tribunal in the case of Modi Rubber Limited Vs. UOI reported in 1987 (29) ELT 502 and CCE Vs. Aluminium Industries Limited reported in 1987 (31) ELT 748 in support of this contention. Learned Counsel also submitted that this decision of the Tribunal in the Aluminium Industries case has become final inasmuch as the Supreme Court has dismissed the appeal of the Revenue against this order.
6. As against the aforesaid submissions on behalf of the appellants, the learned DR has submitted that amendment dated 26.5.95 had no bearing on the levy of excise duty on 'sot waste' in as much as 'soft waste' does not find specific mention in the Central Excise prior to the amendment w.e.f. 26th May, 1995 or subsequent to that.He, therefore, submitted that the position with regard to excitability of softwaste remained the same prior to and after the amendment.He pointed out that as there was no dispute with regard to dutiability of soft waste subsequent to the amendment, its exisability cannot be questioned for the previous period also. He also submitted that the tariff item 5201 included 'garnetted stock' specifically under the heading "waste yarn (hardwaste)." He also submitted that garnetted stock arose prior to spinning and as garnetted stock found specific mention in the tariff heading, a=cotton waste of all kinds were excisable under that heading.He also referred to the following definition of garnetted stock in Fair Child's Dictionary of Textile Terms:--
"Garnetted Stock- The fiber recovered by garnetting waste, rags and clipping of wool, cotton, rayon and other man-made fibers, etc."
7. The learned DR further argued that the mere non-mention of an item specifically in the tariff is no reason for holding that it is not excisable. He relied on the decision of the Supreme Court in the case of Pankaj Jain Vs Union of India reported in 1994 (72) ELT in support of this contention. The learned DR also referred to Section 3(1) of the Customs Tariff Act and submitted that it is settled law that for the purpose of imposition of additional duties of customs, there is no requirement that the similar goods must be subject to duty under Central Excise or that they should be manufactured in India.
8. The issue for decision in this case is a strictly legal one i.e. whether cotton soft waste were liable to duty of excise prior to the amendment of chapter 52 w.e.f. 26 the May, 1995. In terms of Section 3 of the Central Excise Act, duties of excise are leviable on all 'excisable goods' which are produce or manufactured in India. Further, excisable goods have been defined in Section 2(d) of the Act as 'goods specified in the schedule to Central Excise Tariff Act, 1985'. This legal position applies equally to goods produced in a 100% EOU and other units. Therefore, the excitability would depend upon whether the product in question is excisable goods i.e. goods specified in Central Excise Tariff. There is no dispute that tariff heading 52 is the heading relevant to the present case. That heading specified `waste yarn (hard waste)(including garnetted stock)' prior to 26.5.95. Therefore, the relevant question for decision is whether the soft waste in question was covered by this entry.It is clear from the order in original passed by the Deputy Commissioner that waste in question which was held to be not excisable by him consisted of `flat waste, comber noils, dropping and sweeping waste of cotton' which are soft waste.There is no mention of garnetted stock among the goods.Therefore, the dispute is with regard to the scope of the tariff entry excluding garnetted stock. Thus, the entry for consideration is only "waste yarn(yard waste)". There is no dispute at all that the waste in question was not waste yarn. Admittedly, the waste arose prior to spinning of yarn, at the stage of cleaning and processing of cotton. In these circumstances, the Deputy Commissioner's finding that the soft waste in question was not covered by the chapter heading 5201 is in accordance with the materials on record and since such waste was not specified in the tariff, it followed that they were not excisable goods and, therefore, not leviable to excise duty prior to 26.5.1995. Even though the learned DR has relied on the inclusive definition of heading 5201, which includes garnetted stock,we are not able to find that inclusive clause to be of any assistance to the Revenue inasmuch as record of the case clearly shows that the issue related to dutiability of soft waste and not garnetted stock. The reference made by the Id. DR to provisions of Section 3 of the Customs Tariff Act relating to additional duties of customs is also of no assistance to the Revenue as the dispute in the present case is with regard to levy of Central Excise duty under Section 3 of the Central Excise Act, 1944 and not levy of additional duty of Customs on imported goods. We do not find the reliance placed by the learned DR on the decision of the Supreme Court in Presto Industries case and Pankaj case also to be of any relevance. The decision in Pankaj Jain case related to classification of machinery parts and not whether machinery parts in question were excisable at all. The decision in Presto Industries case related to lvey of additional duty of custom and does not concern the levy of Central Excise duty. In the circumstances these decisions are of relevance to the present dispute.
9. In view of the facts and legal position stated above, we uphold the decision of the Deputy Commissioner in the impugned order in original that soft waste of cotton was not leviable to Central duty prior to the amendment of chapter 52 w.e.f. 26th May, 1995, as soft waste was not excisable goods i.e. goods specified in the schedule to the Central Excise Tariff Act prior to the amendment. The reference is, thus, answered in favour of the assessee. Further, in the light of our decision on the reference,that cotton soft waste was not liable to Central Excise duty prior to 26th May, 1995, we allow the appeals of the assessee and set aside the contrary order of the Commissioner(Appeal).