2004 (2) TMI 645 - AT - Central Excise

Tribunal grants exemption for manufacturing inputs in battery production despite rejection of some cells.

The Tribunal allowed the appeals, setting aside the Commissioner's decision. It held that the Appellants were entitled to exemption under Notification No. ... Exemption to inputs captively consumed in factory of production Issues:Availability of exemption under Notification No. 67/95 for inputs used in the manufacture of rejected batteries.Analysis:The appeals revolved around the availability of exemption under Notification No. 67/95 for inputs used in producing rejected batteries. The Appellant, a manufacturer of Dry Battery Cells, claimed exemption under the mentioned notification for components used in manufacturing dutiable final products. The dispute arose when rejected/damaged Dry Battery cells were considered waste and not marketable, leading to duty demands and penalties. The Commissioner (Appeals) upheld this decision, citing precedents like the Union Carbide case. The Appellant argued that rejected cells are part of the manufacturing process and should not disqualify them from the exemption. They referenced the Hindustan Petroleum case to support their stance.The Respondent countered by stating that the rejected cells do not fall under the Central Excise Tariff Act, hence, not eligible for the exemption. They highlighted that waste and scrap of Dry Battery cells are not excisable goods under the Act. The absence of a specific Tariff Heading covering waste and scrap was emphasized. The Respondent also pointed out the lack of a provision similar to Rule 57D in Notification No. 67/95. Additionally, they mentioned the exemption for rejected batteries and the proviso under Notification No. 67/95 regarding the use of goods in the manufacture of exempted products.After considering both arguments, the Tribunal found that the Appellants used components in manufacturing Dry Battery Cells, a dutiable final product specified in the notification. The rejection of some cells during the process did not negate the captive consumption of components for the specified final product. The Tribunal distinguished the case of waste and scrap from the Appellants' situation, emphasizing that the final product was Dry Battery Cells, not waste. They clarified that the proviso under Notification No. 67/95 did not apply as the final product attracted Central Excise duty. Consequently, the impugned Order was set aside, and all appeals were allowed.This detailed analysis of the judgment highlights the key arguments, legal interpretations, and the Tribunal's reasoning behind granting the Appellants the exemption under Notification No. 67/95 for inputs used in manufacturing rejected batteries.