2004 (1) TMI 328 - SC - Income Tax

Polyurethane foam waste eligible for tax exemption under Notifications 53/88 and 54/88

COLLECTOR OF CENTRAL EXCISE, MEERUT Versus MARUTI FOAM (P) LTD.

The Court upheld that waste, parings, and scrap from polyurethane foam manufacturing are entitled to exemption under both Notification 53/88 and 54/88, ... Waste, parings and scrap - benefit of the exemption Notification – assessee submitted that on the basis that Notification 54/88 applied, the assessee was entitled to the benefit of the exemption to the extent that it provided for payment of nil rate of duty - condition prescribed not fulfilled by the respondent inasmuch as the flexible PUF out of which the WPS had resulted, not subjected to any duty and had been exempted from payment of duty by Notification 217/86 - circulars in question issued by the CBEC construing the phrase “duty already paid” must be held to bind the Revenue as long as they were not withdrawn which they were but only in 2002 - appeals are, accordingly, dismissed albeit for reasons which are different from those expressed by the Tribunal - decision not operate to reopen any assessment order nor any duty already paid become refundable by reason of this judgment Issues:1. Interpretation of exemption Notification 53/88 and 54/88 for waste, parings, and scrap (WPS) arising in the manufacture of polyurethane foam blocks.Analysis:The primary issue in this case revolves around determining whether waste, parings, and scrap (WPS) from the manufacture of polyurethane foam blocks are entitled to the benefit of exemption under Notification 53/88 or 54/88. The appellant argues that WPS of polyurethane foam should be covered by Notification 54/88 and not 53/88, as WPS of flexible polyurethane foam had been specifically excluded from Notification 53/88. The Tribunal, however, opined that both Notifications applied to WPS of polyurethane foam, granting the greater benefit under Notification 53/88 to the assessee. The appellant contends that the Tribunal erred in holding that the notifications overlapped, presenting detailed arguments supporting this claim. Despite acknowledging the substance in the appellant's submission, the Court refrained from deciding on the overlap issue due to an argument put forth by some assessees, suggesting that even under Notification 54/88, the assessee could benefit from nil rate of duty payment.Regarding the specific provisions of the notifications, Notification 53/88 exempts goods falling under specified headings from excise duty subject to certain conditions, while Notification 54/88, as amended in 1989, introduced changes in the rates and conditions for flexible polyurethane foam and its waste, parings, and scrap. The amendments in 1989 altered the rates and conditions for WPS of flexible polyurethane foam under Sl. No. 2, 3, and 6, emphasizing the rate of duty based on condition fulfillment. The assessees argue that the WPS in question falls under Sl. No. 3, highlighting the similarity between Sl. No. 2, 3, and 6 in the original and amended notifications, with differences in duty rates based on conditions.Furthermore, a critical contention raised by the appellant is that the condition specified under Sl. No. 3 of the notifications had not been met by the respondent, as the flexible polyurethane foam, from which the WPS originated, had not been subjected to any duty due to an exemption under Notification 217/86. This argument draws support from a previous court decision and emphasizes the interpretation of the phrase 'already been paid' in the context of duty payment. The Court acknowledges the existence of circulars by the Central Board of Excise and Customs (CBEC) during the relevant period, interpreting the phrase in question to include cases with nil rates of duty, based on prior court decisions. The Court upholds the binding nature of these circulars on the Revenue unless withdrawn, despite subsequent court decisions altering interpretations. Consequently, the Court dismisses the appeals, affirming the validity of the circulars during the relevant period and clarifying that the judgment will not impact assessment orders or duty refundability.In conclusion, the judgment delves deep into the interpretation and application of exemption notifications concerning waste, parings, and scrap from polyurethane foam manufacturing, addressing issues of overlap, condition fulfillment, circular interpretations, and binding nature of administrative directives on the Revenue, ultimately resulting in the dismissal of the appeals without affecting existing assessments or duty payments.