Customs, Excise and Gold Tribunal - Bangalore
Forbes Aquatech Ltd. And Patspin India ... vs The Commissioner Of Central Excise on 17 January, 2008
Equivalent citations: 2008(128)ECC182, 2008(154)ECR182(TRI.-BANGALORE)
ORDER S.L. Peeran, Member (J)
1. Both these appeals raises common question of law and facts and hence they are taken up together for disposal as per law.
2. In the case of Forbes Aqua Tech Ltd., a show cause notice dated 29.12.05 was issued with the contention that the assessee had during the period September 2003 to July 2005, cleared inputs to the job worker. In the job workers premises, scrap/waste was generated which was not received back by them and therefore they were held to be not eligible to avail cenvat credit. In this case, it is pointed out by the appellants that in terms of the provisions of Rule 57F(5) of the rules prevailing earlier to this period, the rule required the waste arising in the course of any operation to be returned to the factory of manufacturer of final product. However during the relevant period, the provision was amended and this provisions was deleted by Rule 4(5)(a) which is reproduced herein below:
The cenvat credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other documents produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty day's, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service.
3. It is pointed out by the counsel that the Board has issued clarification by F.No B-4/7/2000-TRU dated 3.4.2000 and para 5 clarified that the only final product should be returned within 180 days and waste/refuse or by-product need not be returned and Cenvat credit cannot be denied on that count Para 5 of the said clarification is reproduced herein below:
Some doubts have been raised whether CENVAT credit would be admissible on the part of input that is contained in any waste, refuse or by-product. In this context it is clarified that CENVAT credit shall be admissible in respect of the amount of inputs contained in any of the aforesaid waste, refuse or by-product. Similarly, CENVAT should not be denied if the inputs are used in any intermediate of the final product even if such intermediate is exempt from payment of duty. The basic idea is that CENVAT credit is admissible so long as the inputs are used in or in relation to the manufacture of final products, and whether directly or indirectly.
4. It is the submission of the learned Counsel that this issue is covered by the ruling rendered in the case of CCE Meerut v. Sakambari Sugar and Allied Industries Ltd. 2004 (176) ELT 819 (Tri-Del) would apply to the facts of the case. He refers to para 4 of the order which is reproduced herein below.
We have considered the submissions of both the sides, Rule 57CC of the Central Excise Rules applies only in those cases where a manufacturer is engaged in the manufacture of any final product which is chargeable to duty as well as any other final product, which is exempted from the whole of the duty of excise or is chargeable to nil rate of duty. Bagasse is obtained by the respondents in the course of manufacture of sugar out of cane sugar. Bagasse may find a mention in the Schedule to the Central Excise Tariff Act, but it has not become a final product merely on the fact that it is mentioned in the Tariff. This is nothing but a waste obtained during the manufacture of sugar The provisions of Rule 57D(1) of the Central Excise rules clearly provides that credit of duty shall not be denied or varied on the ground that part of the inputs is contained in any waste, refuse or by-product arising during the manufacture of the final product. As waste cannot be regarded as a final product, provisions of Rule 57CC are not applicable. This was the view held by the Tribunal in the case of Rudra Bilas Kisan Sahkari Chini Mills Ltd., (supra). We therefore, find no infirmity in the impugned order and reject the appeal filed by the Revenue.
5. Learned DR submits that the waste ought to have been returned to the factory and reiterates the departmental view.
6. I have carefully considered the submission and find that the Rule 57F(5) earlier to the period in question required the waste to be returned to the factory of manufacturer of final product. However the amended Rule 45(a) applicable to the period in question as reproduced above refers only to return of the final product within 180 days and it does not have any specific provision with regard to return of waste/scrap. Return of final product is not disputed. The board has clarified in para 5 of their letter dated 3.4.2000 extracted supra that cenvat credit cannot be denied on the waste/refuse or by product. This issue has been clarified in the case of CCE v. Shakambari Sugar & Allied Industries Ltd., in para 4 which is extracted supra. In terms of this case, the assessee is eligible to avail Cenvat credit on the waste produced in the manufacture of final product. Therefore, the order against the appellant Forbes Aquatech is not legal and proper. The same is set aside by allowing the appeal.
E/393/07
7. In the case of Patspin India Pvt Ltd., the issue is common. In this case, the waste has arisen within the factory and the revenue has denied cenvat credit on the waste. Learned Counsel submits that the issue is covered by the ruling rendered in the case of CT Cotton yarn Ltd., v. CCE 2007-TIOL-1365-CESTAT-DEL in Para 8 to 12 which is reproduced herein below.
8. We have already noted that cotton is a natural fiber 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 fiber into spinnable lengths. The soft waste in question is a reject and residue arising in the processes. It is an amalgam of waste (dust etc.) materials as well as short fibers. Thus, the item is a combination of natural fiber as well as waste materials. The issue as to whether manufacture is involved is to be decided in this context and the processes involved. It ought to be noted that the processes in question are mere physical processes of segregation and separation of usable natural fibers from non-usable short fiber and dirt material. As pointed out by the Ld. Counsel, the Hon'ble 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 appellant's case is also supported by the ruling of the Hon'ble 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.
9. Coming to the decisions of the Tribunal, which have been relied on by the Revenue, we note that though the cases related to cotton waste, the present issue, as to whether cotton waste is the result of manufacture, was not raised or considered in any of those cases. These decisions only noted that cotton waste is an item specifically figuring in the Central Excise Tariff and, therefore, it is an excisable item. It is well settled that a decision is not an authority on a proposition which was neither raised nor considered. Therefore, we are of the opinion that these decisions do not cover the issue presently before us and do not bind us in any manner.
10. Before parting with the case, we may note that the present dispute tends to recur in regard to many items. Their mention in the Excise Tariff creates occasion for tax demand. But mention satisfied only half the requirement. The other half being that the item is manufactured or produced in India. This result from the adoption of an international trade classification code for a municipal manufacturing levy.
11. We may also make it clear that since we have decided the appeals on their merits, we are not going into other issues like limitation, though raised.
12. In view of what is stated above, the appeals are allowed with consequential relief if any, to the appellants.
8. The counsel prays for applying the ratio of the above judgments.
9. Learned DR submits that they are not eligible to avail Cenvat credit on the waste produced in the manufacture of the goods.
10. On a careful consideration of the submissions, I notice that the assessee is a 100% EOU and the ratio of the CT Cotton Yarn Ltd., clearly applies to the facts of the case. CT Cotton Yarn Ltd., was a 100% EOU engaged in the manufacture and export of cotton yarn. In the present case waste and scrap were not manufactured goods and hence they cannot be denied with the benefit of Cenvat credit as held in paras 8 to 12 of the judgment rendered in the case of CT Cotton yarn. Respectively following the ratio of the cited judgment, the impugned order is set aside and appeal allowed.
(Pronounced and dictated in open court)