Customs, Excise and Gold Tribunal - Tamil Nadu
Aqua-Vin Pipes Pvt. Ltd. vs Cce on 16 February, 2001
Equivalent citations: 2001(97)ECR106(TRI.-CHENNAI)
ORDER Lajja Ram, Member (T)
1. In this appeal filed by M/s. Aqua-Vin Pipes Pvt. Ltd., the appellants were engaged in the manufacture of plastic pipes and fittings classifiable under sub-heading 3917.00 of the Central Excise Tariff. They had availed of the modvat credit on the raw materials granules used in the manufacture of such pipes and fittings. During the course of manufacture of such pipes and fittings, some waste and scrap-end bits, cutting bits, rejects etc. were generated on which the appellants paid the excise duty. Thereafter, before removing such waste and scrap to their job workers, they took credit of the same paid by them by way of excise duty on their waste and scrap. They availed of the modvat credit equivalent to the amount of duty paid on such waste and scrap by raising invoices on themselves. It was alleged in the three show cause notices issued that the appellants irregularly availed of the modvat credit. After making a reference to Rule 57F(5)(a) of the Central Excise Rules, 1944 (hereinafter referred to as the 'Rules'), the Asstt. Commissioner of Central Excise disallowed the credit of Rs. 8,19,586/- on the ground that the assessee had availed the credit of duty paid by them on the waste and scrap in violation of the provisions of Rules. A penalty of Rs. 40,000/- was also imposed. The Commissioner of Central Excise (Appeals) agreed with the view taken by the adjudicating authority.
2. The matter was heard on 23.1.2001, when Shri R. Raghavan, advocate, submitted that the appellants had paid central excise duty on waste and scrap and at that stage no objection was raised by the Department. They paid duty and then took equivalent credit. The same waste and scrap were sent to their job workers for converting the same into granules. Accordingly to the learned advocate, it was permissible under the provisions of Rule 57F(3) of the Rules. The granules, on receipt back, were used for manufacturing pipes and fittings which were cleared on payment of duty. It was his submission that the matter was covered by the Tribunal's Larger Bench decision in the case of Wyeth Laboratories Ltd. v. CCE, Bombay .
2.1 In reply, Shri S. Kannan, DR, mentioned that while the granules were the inputs for manufacture of pipes, the same could not be said about the waste and scrap. The waste and scrap was neither input nor intermediate product. They were final products and they were separately classifiable in the Central Excise Tariff. They could only be removed on payment of appropriate duty. After the appellants had taken credit of the duty paid, the removal in this case was without payment of duty. The manufacturers could not pay duty and then take credit. He submitted that such removals of waste and scrap were covered by the provisions of Rule 57-F of the Rules and could be removed only on payment of duty.
3. We have carefully considered the matter. The appellants were engaged in the manufacture of plastic pipes and fittings (final products) and were using duty paid plastic granules (inputs) in the manufacture of said final products. They were availing of the benefit of modvat credit in respect of the central excise duty having been paid on their inputs. In the course of manufacture of final products, certain waste and scrap of plastics was generated. Modvat credit had already been availed of in respect of the inputs used in the manufacture of final products (out of which the waste and scrap arose). For duty liability on the resultant waste and scrap, in such circumstances (which were otherwise dutiable under Heading 39.15 of the Central Excise Tariff) reference may be made to the Tribunal's decisions in the case of Siemens Ltd. v. CCE, Calcutta and Bajaj Tempo Ltd. v. CCE, Pune 1995 (10) RLT 107 (T).
4. When such waste and scrap arose in the factory of the appellants, they paid excise duty on their own under Heading 39.15 of the Central Excise Tariff, but did not remove the same from their factory. The same was retained in the factory. Thereafter, what the appellants did, they took of the duty earlier paid without any approval. There was no provision of law under which such a credit could be taken in such circumstances. The waste and scrap then without payment of any duty was removed to their job workers.
5. We consider that after taking credit of the duty earlier paid on plastic waste and scrap, the waste and scrap could not be cleared without payment of duty.
6. Under Sub-rule (3) of Rule 57-F (as was in operation during the relevant time) a manufacturer after intimating the Asstt. Commissioner of Central Excise having jurisdiction over the factory and after obtaining dated acknowledgement of the same could 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 under the cover of a challan prescribed in this behalf by the Central Board of Excise & Customs, for certain specified purposes. The inputs in this case were granules, and what was removed were not the granules but the scrap. The scrap was also not partially processed granules. Thus, the removal without payment of central excise duty was not covered by the provisions of the law.
Under Rule 57-F(5) of the Rules, any waste arisen from the processing of inputs in respect of which credit had been taken were required to be. removed on payment of duty as if such waste was manufactured in the factory. After taking the credit back, the appellants had nullified the initial payment of duty. Thus, we consider that the duty in this case has been rightly demanded.
7. The appellants had relied upon the Tribunal's Wyeth Laboratories Ltd. v. CCE, Bombay . The Tribunal in that case was concerned with the metal tariff. Under Section Note 8(a) to Section XV of the Tariff, Waste and Scrap has been defined as metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons. We consider that the same definition could not be made applicable to plastic wastes classifiable under Heading 39.15 of the Central Excise Tariff. We do not consider that the facts and circumstances before us are similar to the one in which the Larger Bench had recorded their decision in the case of Wyeth Laboratories Ltd., supra. We agree with the learned DR that the facts are distinguishable.
8. In the facts and circumstances of the case, we agree with the view taken by the learned Commissioner of Central Excise (Appeals). However, in the facts and circumstances of the case, we set aside the penalty of Rs. 40,000/- imposed by the Asstt. Commissioner of Central Excise whose order has been confirmed by the Commissioner of Central Excise (Appeals).
9. Thus, except the setting aside of the penalty amount of Rs. 40,000/-, the appeal is otherwise rejected.
(Order pronounced in open Court on 16.2.2001).