Customs, Excise and Gold Tribunal - Mumbai
Collector Of Central Excise And Customs vs Chloride Industries Ltd. on 20 May, 1993
Equivalent citations: 1993(44)ECC60
ORDER
P.K. Desai, Member
1. Invoking the provisions of Section 35G(1) of the Central Excise and Salt Act, 1944 the Collector of Central Excise and Customs, Pune has filed the present application, seeking reference to the High Court, on the issue as formulated by him pleading that to be an issue of law, arising out of this Bench's order No. 1658/92 WRB dated 2.9.92 in Appeal No. E/175/92-Bom.
2.1 The respondents, manufacturers of electric storage batteries, had opted for availment of Modvat credit for lead ingots as the inputs in their final product. During the manufacturing process, substantial quantity of lead ingots emerged out, what they described, as waste and scrap, which they initially cleared as such, by availing benefit of exemption vide Notf. 33/81. However, at a later stage, realising that such waste and scrap emerging out, could be recycled and reconverted into lead ingots, but as they had no facility for such reconversion, they started removing the same, under the general permission granted vide Rule 57-F(2) to be given to the job workers, for being returned to them after reconversion as ingots, and ingots so received were being used as inputs for their final product. The removal was without payment of duty as even otherwise, because of the exemption notification No. 33/81, no duty element was involved in such removal. However, the said notification subsequently came to be withdrawn, but the respondents continued to remove such alleged waste and scrap for supplying them to the job workers for reconversion into ingots under the general permission given vide Rule 57-F(2) of the Rules. Such removal without payment of duty was however, objected to, and the Show Cause Notice dated 2.5.91 was issued and amount of Rs. 10,60,259.06 was demanded as duty evaded for a period from 2.11.87 to 28.2.89. Besides raising a plea of demand being barred by limitation prescribed under the Act, a plea was raised that the waste and scrap was being captively consumed and were being sent to job workers for making ingots by following procedure under Rule 57-F(2) and as such the provisions of Rule 57-F(4) did not stand attractive [attracted?]. Circular No. 15/86 of the CBEC, in relation to identical situation in relation to aluminium scrap was also relied upon.
2.2 The adjudicating authority, holding that the demand was hit by the provisions of limitation specified in the Act dropped the demand of duty but held the appellants as liable to penalty, and imposed personal penalty of Rs. 25,000/- vide Rule 173Q of the Rules.
2.3 In the appeal before the Tribunal, this Bench vide impugned order, held that there was no dispute over the issue that whatever quantity was sent to the job workers, was duly received back by the respondents, and that for that, due accounts were maintained and as such, there was no question of any clandestine removal.
2.4 The main issue before this Bench, therefore, was whether the respondents ought to have resorted to the provisions of Rule 57-F(4) and cleared the waste and scrap on payment of duty or were they justified in resorting to the provisions of Rule 57-F(2) of the Rules, and this Bench held that Rule 57-F(2) did permit removal of input as such or after partial processing, outside for the purpose of repair, refining, reconditioning or to carry out any other operation and what the Respondents did was to send the waste and scrap generated from the input for reconversion as input (ingots) and as such it could be termed as the process of "reconditioning" which, as per the dictionary meaning, meant "restoration to original condition". This Bench also held that in waste and scrap no new product came into existence and the process of reconversion of waste and scrap of ingots again into ingots would fall within the ambit of Rule 57-F(2). Seeking support from the CBEC circular No. 15/89 permitting removal of waste and scrap generated from Aluminium vide Rule 57F(2), this Bench held such removal in relation to lead scrap also as permissible under the same provision and observed that the indentical items in identical situations could not be accorded differential treatment. Holding that the respondents were not guilty of any action towards evasion of duty nor did they act in contravention of any of the provisions of rules, this Bench held that no penalty could be imposed vide Rule 173-Q of the Rules. Thee appeal was accordingly allowed.
3. The appellants seek reference to the High Court on the issue formulated, pleading that to be the question of law, arising out of the aforesaid order. The question as formulated reads:
Whether waste and scrap (of lead) arising during the manufacture of final product can be made applicable for removal under Rule 57-F(2) when Rule 57-F(4) provides specific provision for removal of such waste and scrap?.
4.1 Shri R. Jain, the Id. JDR for the applicant has straineously pleaded that what is generated during the manufacturing activity by using lead ingots as input, is nothing but a waste and scrap, for removal of which, specific provision exists in Rule 57-F(4) and for any removal of such waste and scrap only those provisions could be resorted to. In any case, in his submission, this aspect gives rise to an issue of law and for conclusive and authoritive interpretation, a reference to the High Court is called for. The Id. JDR has also pleaded that circular from CBEC in relation to Aluminium Scrap, could not be considered for granting similar benefits to scrap generated from other metal, as it is within the exclusive powers of the Board to confer any benefit in relation to some items and such facility granted in relation to one cannot be stretched to confer benefit to others in the mode and manner as is adopted by this Bench.
4.2 Shri R. Swaminathan, the Id. Consultant has pleaded that the order of the Bench is based on two aspects namely (a) availability of the facility of removal vide Rule 57-F(2) of the Rules and (b) when concession is given for similar situation in regards to Aluminium scrap, the same to extended to lead scrap as well and no discriminatory treatment ought to be adopted, and has pleaded that the applicant has sought reference only on one of the said point, which would not affect the ultimate result in the appeal, and as such, any decision on the question formulated would be only of academic interest and has referred to the observation of page 1557 of the Book, Law and Practice of Income Tax by N.A Palkiwala, Volume I (8th edition), where dealing with the provisions of Section 260 of the Income Tax Act it is mentioned that questions of mere academic interest need not be answered. He has also referred to the judgment of Madras High Court in Addl. Commissioner of Income Tax v. S. Krishnaswami Reddiar [1978] 115 ITR 505 and of the Supreme Court in Commissioner of Income Tax v. S. Nelliappan , to substantiate his said contention. He has further pleaded that the CBEC has been also taking a view similar to what has been held by this Bench in the impugned order, as, besides giving benefit to the scrap of aluminium, they have given similar treatment to zinc waste as well, as is evident from the Trade Notice No. 239/91 of Addl. Collector Central Excise, Pune, which is based on the Board's letter F.No. 267/48/90 Cx.8 dated 21.6.90. In his submission, thus, availability of the provisions of Rule 57-F(2) in removal of scrap and waste for the purpose of reconversion of ingot has been duly recognised, and no issue of law can be said to have arisen calling for any reference to the High Court.
5. Before examining the points raised, it may be necessary to recapitulate the undisputed facts, as, interpretation of any statutory provisions, has to have the nexus with the factual position to which the same has to be applied. Here the respondents are eligible to claim Modvat benefit and fall within the purview of Section AA of Ch. V of the Central Excise Rules. The inputs for their final product are "lead ingots". They remove waste and scrap generated from lead ingots to the job workers for "reconversion" into ingots and those ingots are taken in use as input in their manufacturing activity. There is no allegation that entire stock of waste and scrap that was removed, has not been returned in the form of lead ingots. It is undisputed that complete accounts are maintained in that regards without any irregularity noticed.
6. It is also pertinent to note that, under the procedure undertaken, there is no element of evasion of duty, inasmuch as, even assuming that the respondents follow the procedure that the applicants desire them to follow, the scrap would have to be removed on payment of duty, the credit for which would be available to the job worker, who in turn would remove the ingots on payment of duty, the credit for which would again be available to the respondents. Thus the entire process would result in only a show that duty was collected, which ultimately would keep the exchequer in the same position as it was, as entire duty paid would get squared up.
7. It may also be noted that had the respondents, possessed facility of reconversion of scrap into ingots in their own factory, then also they would not have incurred any duty liability, as applicability of Rule 57-F(4) could not be invoked. With the end result being the same, the provisions of Rule 57-F(4) were sought to be invoked only because, the respondents instead of doing it themselves, got the process of reconversion done by their job workers, in which case also, as duty indicated hereinabove, there is no effective loss of revenue to the Government (sic).
8. The submission of the Id. Consultant that merely because any answer to the proposed reference has merely an academic value and hence no reference need be made, however, does not appear convincing as the decision of the Bench is obviously, principally, based on the same points and the circular from the CBEC is taken as supporting to the conclusion drawn.
9. Considering the aspect of referring the issue as formulated to the High Court, it may be observed that the reference to the High Court is called for when some uncertainty prevails as to the proper interpretation of law, with various judicial forum having divergent views, or where more than one interpretation appears probable. Here no divergent opinions from judicial forum are reported to be existing and hence the only aspect requiring consideration is whether, any view other than the one taken by this Bench, appears probable.
10. The Central Board of Excise and Customs, have, by allowing removal of waste and scrap of aluminium and zinc under the identical conditions and purposes, clearly established that the said authority has approved and accepted that such removals fall within the ambit of Rule 57-F(2) of the Central Excise Rules, 1944. This by itself, therefore negatives the plea that any removal of waste and scrap has to fall within the ambit of Rule 57-F(4) alone.
11. That apart, both, Sub-rules (2) and (4) as also other sub-rules of Rule 57-F of the Rules, cover different aspects. Sub-rule (2) permits temporary removal of inputs for various reasons as mentioned therein and imposes an obligation for the their due return, whereas Sub-rule (4) deals with removal of waste and scrap. Reading the said clause, for applicability of the said sub-rule, two criteria have to be fulfilled: (1) it should be waste and scrap; (2) removal need not have any obligation to bring them back as such or in any other form. "Waste" or "scrap" have not been given any specific definition in the Central Excise Rules and as such, they are to be read as having ordinary Dictionary meaning. Waste of an item is the one which goes as an useless item, not usable at all as an item from which it has emerged. "Scrap" also has a very similar meaning. Thus waste and scrap as envisaged in Sub-rule (4) should be such items which become absolutely useless for a manufacturer, to any further utilise them in their manufacturing activity. Conversely therefore, whatever is felt as usable, though in practice may be named in any way, may not be considered as waste and scrap, unless and until the manufacturer decides not to make any further use thereof and decides to discard the same, and it is only such items, which fall within the ambit of Rule 57-F(4) of the Rules.
12. The instant case, stands on a different footing. Whatever has emerged out as a residue of the lead ingots used in manufacture of electric storage batteries, has been, instead of being discorded as waste and scrap, has been taken to be recyclable one, and has been sent out to job-workers for reconditioning as the input. The word "reconditioning" has the meaning of "bringing the item into the original condition" and taking that into consideration, the view is taken that the impugned removal would fall within the purview of Rule 57-F(2).
13. With that being the position, the removal would not stand covered by Sub-rule (4) of the Rule 57-F.
14. No convincing argument is found in the application for reference or as orally pleaded, which could probabilise any other contrary view. On the other hand, as indicated above, even the CEBC has recognised removal of the type here, as permissible vide Rule 57-F(2) of the Rules.
15. Under the circumstances, there does not appear any justifiable ground to invoke the provisions of Section 35-G(1) of the Central Excise and Salts Act, 1944 and refer the matter to the High Court.
16. Prayer for reference is therefore rejected.