2004 (7) TMI 239 - AT - Central Excise

Tribunal rules in favor of manufacturer on duty payment for waste removal

NARMADA PLASTICS (P) LTD. Versus COMMISSIONER OF CENTRAL EXCISE, BHOPAL

The Tribunal ruled in favor of the appellant, a manufacturer of HDPE/PP fabrics and woven bags, regarding the removal of waste and scrap to job workers ... Cenvat/Modvat - Job work - Precedent Issues:1. Whether waste and scrap generated in the manufacture of HDPE/PP fabrics and woven bags can be removed without payment of duty under Rule 57F of the Central Excise Rules to the job worker.Analysis:The appeal involved the question of whether waste and scrap arising during the production of HDPE/PP fabrics and woven bags could be sent to job workers without duty payment under Rule 57F of the Central Excise Rules. The appellant, a manufacturer, utilized Modvat Credit for duty paid on inputs and sent waste and scrap to job workers for reprocessing. A show cause notice was issued demanding duty on the waste and processed granules. The Assistant Commissioner initially dropped proceedings, but the Commissioner (Appeals) upheld the duty demand citing a Tribunal decision. The appellant argued that they followed Rule 57F(3) for sending waste for reprocessing, referencing a Tribunal decision in Wyeth Laboratories Ltd. v. C.C.E. The Revenue contended waste and scrap were not considered inputs and must be duty paid, citing a decision by the South Zonal Bench in Techno Cables Pvt. Ltd. v. C.C.E.The Tribunal analyzed the submissions and agreed with the appellant's argument, citing the decision of the Larger Bench in Wyeth Laboratories Ltd. The Larger Bench emphasized that waste is not considered waste until it cannot be further utilized in manufacturing the final product. The Tribunal rejected the Revenue's distinction between metal waste and plastic waste, stating that both are sent to job workers for reprocessing. The Tribunal noted that the decision in Shriram Refrigeration Industries v. C.C.E. was not considered by the Larger Bench. Ultimately, the Tribunal set aside the Commissioner's order and allowed the appeals, following the principles established in the Wyeth Laboratories Ltd. case.This comprehensive analysis of the judgment highlights the key legal issues, arguments presented by both parties, relevant case law references, and the Tribunal's reasoning leading to the final decision.