Tribunal rules in favor of appellants, exempting waste used in manufacturing taxable products

STURDY POLYMERS LTD. Versus COMMISSIONER OF C. EX., CHANDIGARH-I

STURDY POLYMERS LTD. Versus COMMISSIONER OF C. EX., CHANDIGARH-I - 2004 (164) E.L.T. 442 (Tri. - Del.) Issues:
- Duty demand on waste and scrap used in the manufacture of plastic granules exempt from duty
- Applicability of exemption Notification No. 67/95-C.E. to the appellants
- Interpretation of waste and scrap as an input for the manufacture of final products

Analysis:
1. Duty Demand on Waste and Scrap:
The appellants were engaged in manufacturing tubes/pipes of plastics and used waste and scrap of plastics in the manufacture of plastic granules, which were then utilized in the production of tubes/pipes cleared on payment of duty. The demand was raised on the waste and scrap, claiming that the benefit of exemption Notification No. 67/95-C.E. was not applicable, leading to duty imposition and penalties by the authorities.

2. Applicability of Exemption Notification:
The counsel for the appellants argued that the waste and scrap were not the final product and were captively used in manufacturing granules, which were further used in producing tubes/pipes subject to duty payment. It was contended that whenever granules were cleared without being used in tube/pipe production, duty was paid. On the contrary, the SDR argued that waste and scrap were intermediate products, making the appellants liable to pay duty before using them in granule manufacturing exempted under Notification No. 111/95.

3. Interpretation of Waste and Scrap as Input:
The Tribunal found that waste and scrap were indirectly utilized in manufacturing final products (tubes/pipes) that were not exempt from duty. Despite being used in the intermediate stage to produce granules, which were exempt, the waste and scrap ultimately contributed to the production of taxable final products. Citing a precedent, the Tribunal concluded that the benefit of the exemption notification should be available to the appellants since the waste and scrap were utilized indirectly in the production of taxable goods.

4. Precedents and Legal Interpretation:
The Tribunal differentiated the present case from other judgments cited by the SDR, emphasizing the settled issue based on a previous Tribunal decision affirmed by the Apex Court. The Tribunal referred to a specific case involving scrap/re-processed granules where the exemption notification was deemed applicable, reinforcing the applicability of the exemption to the waste and scrap used by the appellants in their manufacturing process.

5. Decision and Relief:
After thorough deliberation, the Tribunal set aside the impugned orders of the Commissioner (Appeals), ruling in favor of the appellants. The appeals were allowed, granting consequential relief as permissible under the law due to the incorrect denial of the benefit of the exemption notification to the appellants based on the utilization of waste and scrap in their manufacturing process.