2018 (3) TMI 265 - AT - Central Excise

Tribunal exempts duty on cotton waste in yarn manufacturing dispute

The Tribunal ruled in favor of the appellant, a 100% EOU manufacturing yarns, in a dispute over the duty liability on waste generated during the ... 100% EOU - the waste generated during the manufacturing process of cotton blended yarn is cleared without payment of duty - demand of duty on the waste generated in Part-II of the unit by classifying under Chapter 55 of the Central Excise Tariff Act - Held that: - identical issue decided in appellant own case Winsome Yarns Ltd. Versus CCE Chandigarh [2017 (3) TMI 364 - CESTAT CHANDIGARH], where it was held that as predominating factor is of cotton waste, and waste is classifiable under Chapter 52 of cotton yarn manufactured in question, the duty cannot be demanded - appeal allowed - decided in favor of appellant. Issues:Classification of waste generated during the manufacturing process of cotton blended yarn under Chapter 55 of the Central Excise Tariff Act - Duty liability on waste - Admissibility of separate clearance for waste generated in two different manufacturing processes.Analysis:The appellant, a 100% EOU engaged in manufacturing yarns under Chapters 52 and 55 of the Central Excise Tariff Act, faced allegations regarding the clearance of waste generated during the manufacturing process of cotton blended yarn under Chapter 55. The appellant maintained separate records for waste generation and sale in two parts of the unit but faced challenges in segregating cotton waste and polyester waste from the waste generated during the manufacturing process of cotton blended yarn. The Revenue contended that waste from different manufacturing processes needed separate clearance as waste of cotton yarn and cotton blended yarn attract different duties. Various show cause notices were issued demanding duty on waste generated in Part-II of the unit classified under Chapter 55. The matter was adjudicated, confirming duty demand, interest, and imposing penalties on the appellant, leading to the appeal.The appellant's counsel argued that a previous decision in the appellant's favor for an earlier period supported their case, emphasizing that waste arising from the manufacturing of cotton blended yarn should be the only basis for duty demand. The Tribunal considered the facts, noting that waste of cotton blended yarn and cotton dyed yarn was not kept separately, remaining as mixed waste. Referring to Standard Input-Output Norms, the Tribunal highlighted the predominance of cotton waste over acrylic fiber waste, classifying the waste under Chapter 52 of the Central Excise Tariff Act, exempting it from duty payment. Relying on the earlier decision in the appellant's own case, the impugned order was set aside, and the appeals were allowed with consequential relief.In conclusion, the Tribunal's decision emphasized the correct classification of waste based on the predominance of cotton waste over other materials, leading to the exemption from duty payment. The judgment highlighted the importance of maintaining separate records for waste generated in different manufacturing processes and the application of relevant tariff provisions to determine duty liability accurately.