1983 (12) TMI 175 - AT - Central Excise

Appellate Tribunal classifies scrap rubber as goods under Central Excise Tariff; duty imposed with exemptions

The Appellate Tribunal held that scrap rubber arising in the factory during the manufacture of tyres and tubes was classified as goods under Item 68 of ... CLAASIFICATION Issues:Classification of scrap rubber for duty under Item 68 of Central Excise Tariff.Analysis:The case involved a dispute regarding the classification of scrap rubber arising in the factory of the appellants during the manufacture of tyres and tubes for duty under Item 68 of the Central Excise Tariff. The appellants argued that the scrap rubber was an automatic by-product of the manufacturing process, not intended for production, and should not be considered goods. They relied on various judgments to support their claim, including the Supreme Court's decision in the DCM case and the Bombay High Court's ruling in the Indian Aluminum Company case.On the other hand, the Department contended that scrap rubber constituted goods as per the Supreme Court's definition and was sold for further use in manufacturing hard rubber products. They cited the Allahabad High Court's decision in the Oudh Sugar Mills case to argue that by-products and residual products in the manufacturing process were also liable to duty. The Department highlighted previous Tribunal orders where similar by-products were deemed dutiable.The Appellate Tribunal agreed with the Department's position, emphasizing that scrap rubber involved labor and manufacturing activity, distinct from raw materials, satisfying the Supreme Court's definition of 'manufacture.' The Tribunal rejected the appellants' argument that only intended goods could be taxed, citing various instances in the tariff where by-products were taxed under different items. The Tribunal differentiated the appellants' case from the Kolhapur Steel Ltd. case, as the starting raw materials were different.Ultimately, the Tribunal held that the scrap rubber was liable to duty under Item 68 of the tariff, aligning with the Supreme Court and Allahabad High Court judgments. However, the Tribunal granted relief to the appellants concerning the duty on the burnt rubber scrap, directing appropriate exemptions under specific notifications and rules. The appeal was rejected, subject to the relief granted for the burnt scrap rubber.