Duty on processed waste must follow the tariff rate for waste, not the original yarn rate, where movement is duly authorised.

Waste arising from draw texturising of yarn, once classified as waste under TI 18-IV of the First Schedule to the Central Excises and Salt Act, 1944, was chargeable only at the rate applicable to waste and not at the rate applicable to yarn. The movement of yarn under permission granted under Rule 56B of the Central Excise Rules, 1944, was treated as regular, and the authority dealing with the assessee could not question the validity of permission granted for the supplier's factory. Because the alleged irregularity in movement was not sustainable, the demand based on the yarn rate and the remand order were set aside, with consequential refund relief noted.

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Issues: Whether polyester waste generated during draw texturising of yarn received under Rule 56B was chargeable to duty at the rate applicable to yarn or at the rate applicable to waste, and whether the remand and demand based on alleged irregularity in the movement of the yarn could be sustained.

Analysis: The waste had already been classified under TI 18-IV of the First Schedule to the Central Excises and Salt Act, 1944 and had suffered duty at the rate applicable to waste. The movement of yarn from the supplying factory to the processing unit was under permission granted under Rule 56B of the Central Excise Rules, 1944, and the authority dealing with the assessee could not go into the validity of the permission granted by the jurisdictional Assistant Collector over the supplier's factory. Once the movement of the semi-finished goods was held to be regular, the foundation of the demand collapsed. The duty payable on the cleared waste was governed by the rate applicable to waste, not by the rate applicable to yarn.

Conclusion: The demand at the yarn rate was unsustainable and the remand order could not stand; the appeal was allowed in favour of the assessee.

Final Conclusion: The impugned order was set aside, the duty demand on the waste was rejected, and the assessee was granted consequential refund relief.

Ratio Decidendi: Where waste arising from processing is duly classified as waste and the underlying movement of goods is authorised under Rule 56B, duty must be levied according to the tariff and notification applicable to the waste itself, and not by reference to the rate applicable to the original yarn.

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