1986 (3) TMI 220 - AT - Central Excise

Polyester Waste Subject to Excise Duty. Manufacturing Process Ruled Taxable.

The Tribunal held that waste generated during the manufacture of polyester fibre/tops from duty-paid waste is subject to excise duty under item No. 18-IV ... Waste - Non-cellulosic waste, all sorts Issues Involved:1. Whether the waste generated during the manufacture of polyester fibre/tops from duty-paid waste is liable to excise duty.2. Whether the chemical and physical properties of the original waste and resultant waste affect their dutiability.3. Whether the process of depolymerisation and repolymerisation constitutes 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944.4. Applicability of previous judgments and notifications to the present case.Detailed Analysis:1. Liability of Excise Duty on Waste Generated:The primary issue is whether the waste generated during the manufacture of polyester fibre/tops from duty-paid waste should be subject to excise duty. The Assistant Collector of Central Excise, Madras, initially held that such waste is dutiable. This decision was upheld by the Appellate Collector of Central Excise, Madras, who stated that the original duty-paid waste lost its identity due to admixture with other raw materials, resulting in fresh waste that is subject to duty.2. Chemical and Physical Properties:The appellants argued that the original waste and the resultant waste are chemically identical and fall under the same tariff item No. 18IV of the CET, thus should not be charged to duty again. They supported their argument with a technical note from Dr. L.R. Subbaraman, which detailed the chemical and physical properties of the input and output waste, showing no significant difference between them. However, the Tribunal noted that despite the chemical similarities, the process involved significant chemical reactions, transforming the waste into a new product.3. Depolymerisation and Repolymerisation as 'Manufacture':The Tribunal examined the process described by Dr. Subbaraman, which involves glycolysis (depolymerisation) and repolymerisation. This process converts the polyester polymer (PET) into its monomeric stage and then back into polyester polymer. The Tribunal concluded that these chemical reactions constitute 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944. This was supported by a similar case, Nirlon Synthetic Fibre & Chemicals Ltd. v. C.C.E. Bombay, where the recovery of caprolactum from nylon waste was deemed 'manufacture.'4. Previous Judgments and Notifications:The appellants cited several previous judgments and notifications to support their case:- Indian Organic Chemicals Ltd. v. Union of India & Ors. (1983 E.L.T. 34): The issue in this case was whether the use of MEG in the manufacture of fibre/tops from duty-paid waste would disqualify the exemption under notification No. 279/77. The Tribunal clarified that this case was not applicable to the present issue, which concerns the dutiability of waste arising during manufacture.- Collector of Central Excise, Aurangabad v. Anil Chemicals Pvt. Ltd. (1985 (21) E.L.T. 889): This case held that improving the quality or purity of a product does not constitute 'manufacture.' The Tribunal found this decision inapplicable as the present case involves significant chemical reactions.- Kolhapur Steel Limited v. Collector of Central Excise, Pune (1983 (2) ETR 692): This case dealt with the generation of steel scrap during the manufacture of steel ingots, which was deemed not to involve 'manufacture.' The Tribunal distinguished this case from the present one due to the absence of chemical conversion in the former.Conclusion:The Tribunal concluded that the waste generated during the manufacture of polyester fibre/tops from duty-paid waste is subject to excise duty under item No. 18-IV of the CET. The process of depolymerisation and repolymerisation constitutes 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944. The appeal was dismissed, and the impugned order was confirmed.