1985 (2) TMI 267 - AT - Central Excise

Tribunal: Broken glass 'Bhagar' subject to excise duty, recovery limited to 6 months

The Tribunal ruled in favor of the Department, holding that broken glass (`Bhagar`) is liable to central excise duty as it qualifies as excisable goods. ... Manufactured item - definition of goods - excisable goods - by-products and residuary products - classification under Tariff Item 68 - classification under Item 23-A(4) - time bar and limitation - normal six months - longer limitation period of five years on account of suppression - remand for fresh consideration of trade goods pleaManufactured item - definition of goods - excisable goods - by-products and residuary products - classification under Tariff Item 68 - classification under Item 23-A(4) - Whether broken glass ('Bhagar') is a manufactured item and excisable goods, and its tariff classification before and after 1-3-1979. - HELD THAT: - Applying the ratio of the Tribunal's earlier decision in the rubber scrap case and the Supreme Court authorities relied upon therein, the material 'Bhagar' is distinct from its raw materials, has undergone transformation by labour and energy, is known and traded as glass (broken/waste glass) and fetches commercial value. By products and residual products are not excluded from excise liability; the Appellate Collector's reliance on authorities treating aluminium dross as scum/refuse is inapposite because 'Bhagar' is of considerable value and widely traded. Accordingly, until 28-2-1979 the residuary Tariff Item No. 68 applies; with effect from 1-3-1979, after the incorporation of the word 'Glass' in Item 23 A(4), 'Bhagar' falls under Item 23 A(4). [Paras 9, 10]'Bhagar' or broken glass is a manufactured excisable good; classifiable under Item 68 up to 28-2-1979 and under Item 23 A(4) on and from 1-3-1979.Time bar and limitation - normal six months - longer limitation period of five years on account of suppression - Whether demands for past duty are time barred or whether the longer five year limitation for suppression applies. - HELD THAT: - All show cause notices in these cases were issued after 6-8-1977. The longer five year limitation permitted by the Proviso to rule 10 (for suppression) was not invoked in the show cause notices and no facts constituting suppression were specifically pleaded therein from which the longer period could be inferred. Consequently, only the normal six month limitation period is available to the Department for past recoveries in these matters. [Paras 11]Demands for duty are limited to the normal six month period; the five year period for suppression is not available in the absence of invocation and disclosure in the show cause notices.Remand for fresh consideration of trade goods plea - Whether the plea in Appeal No. 685/83 D that the material was purchased (trade goods) and not of the respondents' manufacture requires fresh adjudication. - HELD THAT: - The Appellate Tribunal did not decide the distinct factual plea raised by M/s. Emkay Glass Works that the material in Appeal No. 685/83 D was purchased from others and therefore trade goods. The Department itself invited remand if facts were different. The Tribunal accordingly directed that the matter be sent back to the Collector (Appeals) for fresh consideration of that specific plea. [Paras 11, 12]Appeal No. 685/83 D is remanded to the Collector (Appeals) for fresh decision on the respondents' contention that the material was purchased trade goods and not of their manufacture.Final Conclusion: The Tribunal holds that 'Bhagar' (broken glass) is an excisable manufactured good-classifiable under Item 68 up to 28 2 1979 and under Item 23 A(4) on and from 1 3 1979; past demands are limited to the normal six month period in the absence of invocation of the five year suppression proviso; and Appeal No. 685/83 D is remanded for fresh consideration of the respondents' plea that the material was purchased trade goods. Issues Involved:1. Liability of broken glass (`Bhagar`) to central excise duty.2. Applicable tariff item for `Bhagar`.3. Time bar for recovery of past duties.4. Classification of `Bhagar` as a manufactured item or process scrap.5. Consideration of supplementary appeals and condonation of delay.Detailed Analysis:1. Liability of Broken Glass (`Bhagar`) to Central Excise Duty:The primary issue was whether broken glass (`Bhagar`) is liable to central excise duty. The Appellate Collector had previously decided in favor of the respondents, holding that broken glass was a waste material and not excisable. The Department appealed this decision, arguing that `Bhagar` is a material of high value, regularly bought and sold, and used for making glass bottles and other articles. The Tribunal agreed with the Department, stating that `Bhagar` is different from its raw materials and satisfies the definition of 'goods' as laid down by the Supreme Court. The Tribunal concluded that `Bhagar` is excisable goods.2. Applicable Tariff Item for `Bhagar`:The Department argued that after the amendment on 1-3-1979, item 23-A(4) of the Tariff, which is specific for other glass and glassware, should apply to `Bhagar`. Before this date, the residuary Item No. 68 would apply. The Tribunal agreed, holding that till 28-2-1979, `Bhagar` was classifiable under Item 68, and from 1-3-1979, under Item 23-A(4), as the item became specific to cover any material in the nature of glass.3. Time Bar for Recovery of Past Duties:The connected issue was whether the demands for recovery of past duties were partially hit by the time bar. The Department conceded that demands for duty made for the period prior to 5 years from the date of the respective show cause notices would not be sustainable. The Tribunal agreed with the respondents that since the longer time limit of 5 years had not been invoked in the show cause notices, only the normal time limit of six months was available for past recoveries.4. Classification of `Bhagar` as a Manufactured Item or Process Scrap:The respondents argued that `Bhagar` was process scrap and not a manufactured article, hence not excisable. The Tribunal, however, held that `Bhagar` is a manufactured item because it is different from its raw materials and involves labor and energy in its transformation. The Tribunal noted that `Bhagar` is regularly bought and sold, fetching considerable value, and thus satisfies the definition of 'goods.'5. Consideration of Supplementary Appeals and Condonation of Delay:The Department initially filed one consolidated appeal but later filed supplementary appeals upon realizing the need for separate appeals. The respondents had no objection to the delay being condoned, and the Tribunal condoned the delay, allowing the consideration of the appeals on merits.Conclusion:In the appeals listed at Sl. Nos. 1 to 4, 6, and 7, the Tribunal set aside the impugned Orders-in-Appeal, restored the orders of the Assistant Collector to the extent that they held `Bhagar` as a dutiable material, and restricted the demands for duty to the normal time limit of six months. For the period before 1-3-1979, `Bhagar` was classified under Item 68, and from 1-3-1979, under Item 23-A(4). The matter in Appeal No. 685/83-D listed at Sl. No. 8 was remanded to the Collector (Appeals) for a fresh decision regarding the respondents' plea that the material was trade goods. The Cross Objection listed at Sl. No. 5 was dismissed.