2008 (7) TMI 108 - AT - Central Excise

Tribunal rules waste from matchbox production not excisable goods under chapter heading 4702.90.

The Tribunal allowed the appeal, ruling that waste, scrap, and parings arising during the production of empty match boxes using duty paid paper and ... Appellant has purchased duty paid paper and paperboard – excisibility of waste, scrap and parings of paper and paperboard arising during manufacture of empty boxes with use that paper and paperboard - These scrap/waste/paring also cannot be considered as intermediate product or by product during the course of manufacture of any excisable goods - scrap of paper cannot be considered as a product different from the paper - Mere mentioning in the tariff is not sufficient to attract excise levy Issues:Classification of waste/scrap/parings of paper and paperboard under chapter heading 4702.90 for excise duty liability; Failure to follow excise formalities like filing classification list, preparing excise invoices, and filing RT-12 return; Applicability of excise duty on waste/scrap/parings arising during the manufacture of empty match boxes.Analysis:The judgment involves the classification of waste/scrap/parings of paper and paperboard under chapter heading 4702.90 for excise duty liability. The appellant, a manufacturer of matches, also produces empty match boxes using duty paid paper and paperboard. The waste generated during this process was sold, leading to a demand notice for excise duty, interest, and penalty. The Tribunal initially allowed the appeal, but the matter was remanded by the Supreme Court for fresh consideration.The appellant argued that they were not manufacturers of paper and paperboard but consumers who generated waste during the production of empty match boxes. They contended that the waste should not be classified as excisable goods based on various legal precedents supporting their position. On the other hand, the Department claimed that the waste arose during the manufacturing process and fell under chapter heading 4702.90, justifying the duty demand and penalties for non-compliance with excise formalities.The Tribunal analyzed the concept of 'manufacture' as defined by the Supreme Court in previous cases. It emphasized that for a product to be considered manufactured, it must emerge as a distinct and new article with its own name, use, and character. In this case, the waste, scrap, and parings of paper and paperboard did not result from a manufacturing activity but were incidental to the production process of empty match boxes. The Tribunal concluded that no new product had come into existence, and the waste should not attract excise duty.Based on the legal principles and factual findings, the Tribunal allowed the appeal, ruling that the waste, scrap, and parings arising from the use of duty paid paper and paperboard did not constitute excisable goods. The decision provided consequential relief to the appellant in accordance with the law, highlighting the importance of distinguishing between manufacturing activities and incidental waste generation in determining excise duty liability.