2024 (12) TMI 1631 - AT - Central Excise

Revenue appeal dismissed: PVC-insulated and copper wire scrap are end cuttings, not excisable; Chapter 7404 classification wrong

CESTAT MUMBAI - AT dismissed Revenue's appeal, holding that generation of PVC-insulated wire/copper wire waste and scrap are end cuttings of procured ... Process amounting to manufacture - generation of waste and scrap of copper/PVC wires - classifiable under Chapter 7404 of the Central Excise Tariff Act, 1985 or not - liability to pay central excise duty on removal of those waste and scrap material outside the factory premises - HELD THAT:- The generation of waste and scrap of PVC insulated wires/copper wires are not arising out of any manufacturing process and those were simply the end cuttings of the wires procured by the respondents for the manufacture of the final products. Since generation of waste and scrap cannot be considered as arising out of any manufacturing process, such activity undertaken by the respondent, would not attract payment of central excise duty. Further, the Department had also not correctly classified the goods under Chapter Heading 7404 to hold that the respondents should be liable for payment of central excise duty on the waste and scrap of PVC insulated wires generated during the course of manufacture of final products. The issue arising out of the present dispute has already been dealt with by the Co-ordinate Bench of the Tribunal, in the case of Finolex Cable Ltd. Vs. Commissioner of Central Excise, Pune-I- [2024 (6) TMI 618 - CESTAT MUMBAI]. On identical set of facts, the Tribunal has held that waste and scrap arising during the manufacture of cables are not liable for payment of central excise duty. There are no infirmity in the impugned order, insofar as it has dropped the show cause proceedings initiated against the respondents. Therefore, appeal filed by Revenue is dismissed. ISSUES PRESENTED AND CONSIDERED 1. Whether generation of waste and scrap of copper/PVC insulated wires during the manufacture of Integrated Automobile Wire Harness Sets amounts to 'manufacture' attracting central excise duty. 2. Whether waste and scrap of PVC insulated wires/copper wires generated in the factory are classifiable under Chapter Heading 7404 of the Central Excise Tariff Act, 1985 and therefore chargeable to central excise duty on removal from the factory premises. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether generation of waste and scrap constitutes 'manufacture' attracting central excise duty Legal framework: Central excise duty is levied on manufacture of goods; liability depends on whether an activity amounts to manufacture producing excisable goods. Precedent Treatment: The Tribunal has considered identical factual situations in an earlier co-ordinate bench decision dealing with waste and scrap arising during cable manufacture and held such waste/scrap not liable to central excise duty. Interpretation and reasoning: The waste and scrap under consideration are described as end cuttings of the duty-paid wires procured for incorporation into the final product. The generation of such end cuttings does not arise from any separate manufacturing transformation producing a new excisable article; rather they are incidental leftovers from use of raw material in the manufacturing process. Consequently, the activity of generating these leftovers cannot be equated with 'manufacture' of distinct goods liable to excise. Ratio vs. Obiter: The finding that end cuttings/waste arising incidentally from the use of inputs in producing a final product do not constitute manufacture is the ratio insofar as it decides liability in the present factual matrix; reliance on the co-ordinate bench decision is treated as binding precedent in like circumstances (ratio for identical facts). Conclusion: Generation of waste and scrap of copper/PVC insulated wires in the described circumstances does not amount to manufacture and therefore does not attract central excise duty. Issue 2: Classification of waste and scrap under Chapter Heading 7404 and liability on removal Legal framework: Classification under the Central Excise Tariff Act determines whether goods are excisable under particular chapter/headings; correct tariff entry is necessary to fasten excise liability. Precedent Treatment: A co-ordinate bench of the Tribunal on identical facts has held that such waste and scrap arising during cable manufacture are not liable for central excise duty; that decision is applied to the present facts. Interpretation and reasoning: The Department's classification of the waste and scrap under Chapter Heading 7404 is rejected on the ground that the material in question are end cuttings not constituting separately manufactured goods subject to that chapter. Because the waste/scrap do not arise as distinct manufactured goods, the impugned classification is incorrect and cannot be the basis for imposing central excise duty on removal from the factory premises. Ratio vs. Obiter: The conclusion that the Department's classification under Chapter 7404 is incorrect is a ratio applied to deny excise liability on the specific waste/scrap; ancillary remarks on classification are confined to the facts and thus operative for like cases. Conclusion: The Department has not correctly classified the waste/scrap under Chapter Heading 7404; consequently, no central excise duty is attracted on removal of such waste/scrap from the factory premises. Combined Conclusion and Disposition Where waste and scrap are mere end cuttings of duty-paid input wires used in manufacture and do not constitute goods arising from a manufacturing process, they neither amount to manufacture nor fall correctly within the contested tariff entry; accordingly, show-cause proceedings/demands based on excise liability for such waste/scrap are to be dropped and the appeal against the order dropping those proceedings is dismissed.