Custom, Excise & Service Tax Tribunal
Gem Spinners (India) Ltd vs Cce Chennai on 21 January, 2008
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal Nos.E/774/2000 (by assessee) &
E/819/2000 (by dept.)
[Arising out of Order-in-Appeal No.41/2000 (M-III) dated 25.2.2000 passed by the Commissioner of Customs & Central Excise (Appeals), Madras/Trichy]
For approval and signature:
Honble Mr. P.G.CHACKO, Member (Judicial)
Honble Mr. P.KARTHIKEYAN, Member (Technical)
1. Whether Press Reporters may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? :
2. Whether it should be released under Rule 27 of the
CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? :
3. Whether the Members wish to see the fair copy of
the Order? :
4. Whether Order is to be circulated to the Departmental
Authorities? :
Gem Spinners (India) Ltd.
CCE Chennai
Appellant/s
Versus
CCE Chennai
Gem Spinners (India) Ltd.
Respondent/s
Appearance :
Smt.Nisha Bineesh, Advocate Shri T.C.Rajadas, SDR For the Assessee For the Revenue CORAM:
Mr. P.G. Chacko, Member (Judicial) Mr. P. Karthikeyan, Member (Technical) Date of hearing : 21.1.2008 Date of decision : 21.1.2008 Final Order No.____________ Per P.G.CHACKO One of these appeals is by the assessee and the other by the Revenue. The assessee, during the material period, was engaged in the manufacture of cotton yarn, as a 100% Export Oriented Unit (EoU). The department found that they had cleared cotton waste to domestic tariff area (DTA) without payment of duty during the period December 1994 to July 1995. They issued a show-cause notice dated 2.3.99 demanding duty of over Rs.9.9 lakhs from the assessee and proposing penalties under various provisions of the Central Excise Rules, 1944. Interest on duty was also demanded under Section 11AB and penalty was also proposed under Section 11AC of the Central Excise Act. The demands and proposals were contested. In adjudication, the original authority confirmed the above demand of duty against the assessee by invoking the extended period of limitation and imposed on them a penalty of Rs.1 lakh. In the assessees appeal against the decision of the original authority, ld.Commissioner (Appeals) set aside the demand of duty for the period prior to 16.3.95 on the ground that cotton waste was not excisable during such period. However, the appellate authority affirmed the demand of duty for the period from 16.3.95 in view of the alignment of the Central Excise Tariff with the Customs Tariff from the said date under the 1995-Budget. As to whether carding and combing operations amounted to manufacture, ld.Commissioner observed to the effect that the said issue was irrelevant and that the issue related to dutiability of soft waste after 16.3.95 in view of the alignment of the two tariffs. However, the penalty imposed by the lower authority was set aside.
2. The present appeal of the assessee is against the demand of duty for the period 16.3.95 and 31.7.95. The ground raised by the appellant is that the process in which cotton waste was generated did not amount to manufacture within the meaning of this expression defined under Section 2 (f) of the Central Excise Act. The Revenues appeal is against that part of the impugned order wherein the demand of duty for the period prior to 16.3.95 and also penalty were vacated. In this appeal, the main ground raised by the Revenue is that though, prior to 16.3.95, there was no specific entry for cotton waste in the First Schedule to the Central Excise Act, the commodity was specifically covered by an entry (SH 5202.00 -- Other) and, by virtue of the proviso to Section 3(1) of the Central Excise Act, which contained specific reference to Section 12 of the Customs Act in the context of quantification of Central Excise duty, duty of excise was leviable on the commodity.
3. Ld.counsel for the assessee submits that, in the case of C.T.Cotton Yarn Ltd. Vs CCE Indore, 2006 (202) ELT 385 (SC), the Honble Supreme Court remanded the question of excisability of cotton waste to this Tribunal and that, in the remanded proceedings, the Tribunal has held that cotton waste cannot be treated as a manufactured product vide Final Order No.384-385/07 dated 27.6.07 in Excise Appeal No.1715 & 1716/97, of the Principal Bench, New Delhi.
4. Ld.SDR has reiterated the grounds of the appeal of the Revenues appeal and also has opposed the assessees appeal.
5. In the case of C.T.Cotton Yarn (supra), the Honble Supreme Court was considering the question whether a 100% EoU, engaged in the manufacture and export of cotton yarn, was liable to pay duty of excise on cotton waste cleared to DTA. The period of dispute in that case was also from 16.3.95 to 31.7.95. The apex court found the commodity to be marketable, but remanded to the Tribunal the question whether the manufacture was involved in the generation of cotton waste during the course of manufacture of cotton yarn. This question was examined by the Tribunal in the remanded proceedings and the following view was taken :-
8. We have already noted that cotton is a natural fibre and that the soft cotton waste in question arises in the process of combing of ginned cotton. These processes are merely for cleaning and arranging fibre into spinnable lengths. The soft waste in question is a reject and residue arising in the process. It is an amalgam of waste (dust etc.) materials as well as short fibres. Thus, the item is a combination of natural fibre as well as waste materials. The issue as to whether manufacture is involved is to be decided in this context and the process involved. It ought to be noted that the processes in question are mere physical processes of segregation and separation of usable natural fibres from non-usable short fibre and dirt material. As pointed out by ld.Counsel, the Honble Supreme Court has ruled in regard to two natural products viz. pineapple and betel nuts that preparing them for use and marketability, even by the addition of preservatives and other materials, does not amount to manufacture of new products. The factual situation in the case of the instant cotton waste is even worse. It is not even the result of making natural materials fit for use. That is the case in Arihant Cotsyan since the cotton in question was used for spinning into yarn. In regard to soft waste, the processes are of elimination and separation of unusable material, the resulting residue is not a manufactured item. The appellants case is also supported by the ruling of the Honble High Court of Delhi that waste material is not a new item having a distinct name, character or use so as to be treated as a manufactured product.
6. We are in agreement with the above view and, accordingly, it is held that the process in which cotton waste was generated in the EoU during the period of dispute did not amount to manufacture within the meaning of this term defined under Section 2(f) of the Central Excise Act and consequently the commodity was not excisable. In this factual scenario, considerations like specific mention of the item in the Central Excise Tariff Act Schedule, marketability etc. are irrelevant. In the result, the assessees appeal is allowed and the Revenues appeal is dismissed.
(Dictated and pronounced in open court)
(P.KARTHIKEYAN) (P.G.CHACKO)
MEMBER (T) MEMBER (J)
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