Customs, Excise and Gold Tribunal - Mumbai
Chloride Industries Ltd. vs Collector Of Central Excise on 2 September, 1992
Equivalent citations: 1993ECR24(TRI.-MUMBAI), 1993(63)ELT633(TRI-MUMBAI)
ORDER P.K. Desai, Member (J)
1. This appeal is directed against the Order-in-Original No. 44/CEX/1991 dt. 2-11-1991 of the Collector of Central Excise and Customs, Pune, dropping the duty demand holding the same as barred by limitation but imposing penalty of Rs. 25,000/ - vide Rule 173Q of the Central Excise Rules, 1944.
2. The appellants are the manufacturers of Electric storage batteries and have opted for availment of duty credit under the MODVAT Scheme. For the purpose of manufacture of their final products, they purchased duty paid lead ingots and availed of credit for duty paid thereon. During the manufacturing process, substantial quantity of waste and scrap arose, which initially they cleared availing the benefit of exemption vide Notification No. 33/81. As per their claim, at a later stage, they however, realised that such a waste and scrap could be utilised for manufacture of Batteries after conversion into ingots and hence under the general permission obtained for the removal of ingot vide Rule 57F of the Rules, they started removing the waste and scrap, following procedure laid down under Rule 57F(2) of the Rules, to the job-workers who converted the scrap and waste into ingots and returned the same to the appellants. The waste and scrap were, during the same period, exempt from duty vide Notification 186/84. Vide amendment dt. 2-11-1987, the said notification was modified withdrawing the exemption to waste and scrap where MODVAT credit was availed of for the inputs. The appellants contend that because they were not removing the waste and scrap for sale, the modification did not affect them and hence continued to remove them following the procedure laid down in Rule 57F(2). A Show Cause Notice dt. 2-5-1991 was however, issued charging them to have contravened the provisions of Rule 173B, Rule 9(1) read with Rule 173G(1) and Rule 173F, Rule 52A read with Rule 173G(2) and Rule 57(4) of the Central Excise Rules, 1944 alleging that the appellants had failed to remove the waste and scrap on payments of duty. Duty evasion to the tune of Rs. 10,60,259.06 was alleged and demand for the same as payable for removal of goods between the period 2-11-1987 to 28-2-1989 was raised. In addition to pleading that the demand was barred by limitation and there was no suppression or mis-statement entitling invocation of extended period, they also pleaded that the waste and scrap was being captively consumed and was being sent out to Job-Workers for making ingots by following procedure under Rule 57F(2) of the Rules. They also referred to CBEC's Circular No. 15/86, clarifying that turning and borings of aluminium (Scrap) arising at the time of manufacture of pistons, could be allowed removal vide Rule 57F(2) and pleaded that the ratio of the same could squarely apply to them. The adjudicating authority, after granting personal hearing came to the conclusion that, waste and scrap was a new dutiable commodity that came into existence during the course of manufacture of excisable goods from lead ingots and for removal thereof, provisions of Rule 57F(4) would stand attracted and not Rule 57F(2). Holding that the duty demanded would be payable, he however dropped the said demand holding that the extended period of limitation was not available. In any case, according to him the appellants had contravened the statutory provisions and were liable to imposition of penalty and hence, passed the impugned order.
3. The department has not come in appeal against the said order. The appellants have however filed the present appeal seeking setting aside of the order of the adjudicating authority not only in relation to imposition of penalty but also in relation to holding them liable to pay the duty, the demand for which has been dropped only because of bar of limitation.
4. Mr. V. Shridharan, the ld. advocate appearing for the appellants, has submitted that there is no dispute over the issue that waste and scrap of lead ingots were liable to payment of duty during the relevant period, and the only ground on which the order of the authority below is challenged is that waste and scrap do not come out as new excisable product as is held by the authority below, but the same only emerges out of the manufacturing process, and that, for the specific purpose that they were removing the same, could not attract the provisions of Rule 57F(4) of the Rules. He has submitted that the waste and scrap generated during the process of manufacture, instead of being disposed of in the market, was being recycled and re-converted into lead ingots, for the purpose of captive consumption and production of excisable final product and that because they did not have any facility for such reconversion they, by following the procedure of Rule 57F(2), sent them to the Job-Workers. He has also pleaded that entire material has come back to the factory and is duly accounted for in their Registers and no doubt is cast as to correctness thereof. The Id. Advocate has pleaded that Rule 57F(2) of the Rules ought to be read wide enough as to cover such items which at one stage, was the part of the input, is used for re-conversion into the input, more particularly in view of CBEC Circular No. 15/44, (F. No. 261/76/2/88 CX., dt.19-4-1989) as published in CBEC Digest April 1989 at Page 1-60, where aluminium scrap generated during the process of manufacture of Aluminium Pistons have been permitted availment of facility of the said provisions, when such a scrap is removed for conversion of ingots. He has also pleaded that the said circular, would, in letter and spirit, stand attracted here, and identical situation in relation to lead waste and scrap cannot be discriminated against. The Id. Advocate has also read certain extracts from the book "Statutory Interpretation" by F.A.R. Bennion as to the value of official statements on meaning of the Act - and has pleaded the circular from CBEC is intended to permit availment of facility vide Rule 57F(2) to removal of waste and scrap for reconversion into ingots and could not be restricted only to Aluminium Scrap. He has contended that though referred to, the same circular has not been considered by the authority below.
5. Mr. B.P. Singh, the Id. JDR while supporting the order of the authority below has pleaded that the waste and scrap cannot be considered as inputs in relation to the final product namely Electric Storage Batteries and as such the provisions of Rule 57F(2) would not stand attracted and that for such waste and scrap distinct provision exists in Clause (4) of the said Rule and therefore, the appellant ought to have adhered thereto. He has also pointed out that the Declaration filed vide Rule 57F(2) does not specifically declare removal of waste and scrap as well and general type of declaration filed could not be read as department's endorsing to the said benefit. In his submission when the provisions are clear and unambiguous, no wider interpretation could be possible.
6. Considering the submissions made and perusing the record there is no dispute over the point that lead ingots are declared and approved inputs for final product Electric Storage Batteries. There is also no challenge to the plea that the waste and scrap, the subject matter at issue is generated while utilising the inputs for the manufacture of final product. There is also no dispute that waste and scrap when cleared from the factory are chargeable to duty.
7. The waste and scrap so generated are the remnants emerging as a necessary consequence of the manufacturing activity undertaken over the lead ingots for bringing out the final product. Merely because the waste and scrap so generated has been made dutiable when sold, it cannot be said that new excisable product has been manufactured. The said approach of the authority below therefore does not sound plausible and cannot be sustained.
8. The main issue for determination, however is whether in the given set of circumstances, the party ought to have resorted to the provisions of Rule 57F(4) and cleared the waste and scrap on payment of duty, or whether they could avail of the benefit under Rule 57F(2). The appellants have, admittedly, followed the procedure of Rule 57F(2) and no contravention or non-compliance thereof is alleged or is made subject matter of the present proceedings.
9. Rule 57F(2) of the Rules, permits the manufacturer to remove, with the permission of the Collector of Central Excise, "inputs as such, or after the inputs have been partially processed during the course of manufacture of final product" at a place outside, for the purpose of repairs, refining, reconditioning or carry out any other operation necessary for the final product or for purpose of manufacture of intermediate products necessary for manufacture of final product. What the appellants have been doing is to send the waste and scrap generated from the inputs during the process of manufacture for being re-converted into ingots and utilise such ingots as input. This could be taken as a process of reconditioning of the inputs. No specific meaning is given to the word "recondition" for the purpose of interpretation of the Rules, and hence falling back upon the Dictionary meaning, is the Chamber's Twentieth Century Dictionary the word "recondition" is shown to mean to restore to original or sound condition and in Webster's Dictionary it is shown as "to restore to good condition". Waste and Scrap being not a new product coming into existence but emerging as remnants of the inputs, when sent out for reconversion into ingots themselves, the same would fall within the purview of Rule 57F(2) and provisions of Rule 57F(4) need not be resorted to. This view gets fortified by the Circular No. 15/89 of the CBEC where, in the identical situation arising in relation to Aluminium scrap and reconversion thereof in ingots, benefit of removal under Rule 57F(2) has been given. There is no mention in the Circular nor is anything brought on record to show that some special circumstances, distinct and not available to lead waste and scrap or in that case, to any such reconvertable scrap, existed requiring Aluminium Scrap to be treated on different pedestal.
10. Even otherwise when for the benefit is conferred on one, otherwise similarly situated, unless something repugnant thereto appears, has to be extended to the other, as there could be no discrimination against, between those similarly situated.
11. Under the circumstances, the finding of the Collector, that benefit of Rule 57F(2) is not available to lead waste and scarp removed for reconversion in ingots, cannot be sustained and is hereby set aside.
12. As such, the demand of duty, even if within the period of limitation, could not have been sustained.
13. It may however be made clear that the aforesaid observation is made on the assumption that the waste and scrap removed were only for the purpose of reconversion into ingots and full and complete account thereof exists.
14. When, in view of the finding as above, there is no evasion or intended evasion of duty, no penal liability could be attributed to the appellants. The penalty imposed by the authority below is solely on account of evasion of duty. In those circumstances, the same also cannot be sustained, and is also set aside.
15. In the result, the appeal is allowed and the order of the authority below is set aside. Consequential relief, if any, to follow.