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Issues: Whether the crimped waste and fibre waste cleared during manufacture of polyester staple fibre were in fact waste or were polyester staple fibre cleared in the guise of waste, and whether duty and penalties could therefore be sustained.
Analysis: The waste in question was held to be an inevitable by-product of the manufacture of polyester staple fibre. The test reports drawn from the manufacturer's premises and from the waste purchaser indicated that the material was waste of synthetic polyester fibre, and the evidence showed that the waste purchased by the intermediaries was subjected to sorting, cleaning and other processing before any further use. The department was found not to have produced positive and direct evidence to establish that the clearances from the manufacturer were polyester staple fibre and not waste. The pricing pattern also did not support the allegation that fibre was being cleared as waste, and the fact that the manufacturer had been under physical control for part of the relevant period weakened the invocation of extended limitation. Once the duty demand on the manufacturer failed, the penalties imposed on the purchasers under the penal rule could not survive.
Conclusion: The goods were held to be waste and not polyester staple fibre, and the duty demand and penalties were set aside in favour of the assessees.
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