1988 (4) TMI 196 - AT - Central Excise

Scrapped Goods Not Excisable Under Central Excise Act

COLLECTOR OF CENTRAL EXCISE Versus DUNLOP INDIA LIMITED

The Tribunal concluded that the scraps produced by M/s. Dunlop India Ltd. are not 'manufactured' goods under the Central Excise Act. Therefore, they are ... Waste/Scrap Issues Involved:1. Whether the scraps produced by M/s. Dunlop India Ltd. are considered 'manufactured' goods under the Central Excise Act.2. Whether these scraps are exempt from duty under Notification No. 179/77 due to being produced without the aid of power.3. The correct classification of the scraps under the Central Excise Tariff.4. The applicability of the Delhi High Court judgment in the Modi Rubber Limited case to the present case.Detailed Analysis:1. Whether the scraps produced by M/s. Dunlop India Ltd. are considered 'manufactured' goods under the Central Excise Act:The primary contention by M/s. Dunlop India Ltd. was that the scraps were not 'manufactured' goods but merely waste products, and hence not excisable under the Central Excise Act. The lower authorities, however, held that these scraps had a distinct identity and market, classifying them under Tariff Item 68. The department argued that the term 'manufacture' under Section 2(f) of the Central Excises and Salt Act, 1944, includes any process incidental or ancillary to the completion of a manufactured product, and thus, the scraps should be considered as manufactured goods.The Tribunal referred to the Delhi High Court's decision in the Modi Rubber Limited case, which held that waste/scrap is not the result of any treatment or manipulation whereby a new and different article emerges. The court observed that the waste/scrap is obtained in the course of manufacturing the end products and not as a result of the manufacture itself. Therefore, the scraps cannot be considered as 'manufactured' goods.2. Whether these scraps are exempt from duty under Notification No. 179/77 due to being produced without the aid of power:M/s. Dunlop India Ltd. alternatively argued that even if the scraps were considered excisable, they should be exempt under Notification No. 179/77 as they were produced without the aid of power. The lower authorities, however, found that power was indeed used in the production of these scraps, making them ineligible for the exemption.Given the Tribunal's conclusion that the scraps are not 'manufactured' goods, the question of exemption under Notification No. 179/77 does not arise.3. The correct classification of the scraps under the Central Excise Tariff:The lower authorities classified the scraps under Tariff Item 68. The department supported this classification, noting that similar scraps like scrap iron, copper waste, and zinc waste are recognized as excisable goods under the Central Excise Tariff. However, the Tribunal, following the Delhi High Court's decision, held that since the scraps are not 'manufactured' goods, they do not fall under any tariff item for excise duty purposes.4. The applicability of the Delhi High Court judgment in the Modi Rubber Limited case to the present case:The Tribunal found that the issues in the present case were fully covered by the Delhi High Court's judgment in Modi Rubber Limited. The High Court had ruled that waste/scrap obtained in the course of manufacturing tyres, tubes, etc., is not a result of manufacture and thus not excisable. The Tribunal also noted that the fact that scraps could fetch a sale price does not make them excisable goods. The Tribunal respected the High Court's decision, which had not been contradicted by any other High Court or the Supreme Court.Conclusion:The Tribunal concluded that the scraps in question are not 'manufactured' goods and thus not excisable under the Central Excises and Salt Act, 1944. Consequently, the alternative plea regarding exemption under Notification No. 179/77 does not arise. The appeals were disposed of accordingly, following the decision of the Delhi High Court in the Modi Rubber Limited case.