1998 (11) TMI 233 - AT - Central Excise

Appeal granted for duty demand on tyre waste, retaining duty-paid status and qualifying for exemption.

MRF LTD. Versus COLLECTOR OF CENTRAL EXCISE, GOA

MRF LTD. Versus COLLECTOR OF CENTRAL EXCISE, GOA - 1999 (106) E.L.T. 392 (Tribunal) Issues Involved:1. Duty demand confirmation under Section 11A of Central Excises and Salt Act, 1944.2. Alleged contravention of Central Excise Rules, 1944.3. Allegation of suppression of facts.4. Applicability of Rule 57D(1) and Rule 57F(4)(a).5. Eligibility for exemption under Notification No. 53/88.6. Time-barred demand and larger period invocation.Issue-wise Detailed Analysis:1. Duty Demand Confirmation:The appeal challenges the Order-in-Original dated 30-4-1992, which confirmed a duty demand of Rs. 3,82,129.17 (B.E.D.) and Rs. 19,106.45 (S.E.D.). This demand was invoked under the proviso to Section 11A of the Central Excises and Salt Act, 1944.2. Alleged Contravention of Central Excise Rules:The department alleged that the appellants contravened several provisions of the Central Excise Rules, 1944, including Rules 173B, 173F, 173C, 9, 173G, 53, 226, and 52A. The appellants were accused of manufacturing and clearing scrap of plastics without proper classification, price list, payment of duty, statutory records, and gate pass.3. Allegation of Suppression of Facts:The department claimed that the appellants removed goods without informing the authorities, constituting suppression of facts. The demand was raised for the period from April 1988 to July 1989. The appellants denied these allegations, asserting that the department was fully aware of the scrap utilization and its sale to scrap merchants.4. Applicability of Rule 57D(1) and Rule 57F(4)(a):The appellants argued that the waste generated during the manufacture of tyres is covered by Rule 57D(1), which states that credit of specified duty should not be denied if part of the inputs is contained in any waste, refuse, or by-product. They contended that the polyethylene film used in tyre manufacture becomes waste mixed with rubber compound, thus falling within the ambit of Rule 57D(1). They also argued that Rule 57F(4)(a) was not applicable in their case.5. Eligibility for Exemption under Notification No. 53/88:The appellants claimed eligibility for exemption under Sr. No. 24 of Notification No. 53/88, which grants full exemption from duty for waste arising from duty-paid polyethylene film. They cited a similar dispute resolved in an R.A.C. Meeting and relied on the Tribunal's judgment in the case of Metrosyl, which held that denial of exemption due to availing Modvat Credit under Rule 57A is not sustainable without specific prohibition or restriction.6. Time-barred Demand and Larger Period Invocation:The appellants argued that the demand was time-barred as there was no suppression of facts. They maintained that all details of their manufacturing process and utilization of polyethylene sheets were known to the department. They cited the Supreme Court judgment in Pushpam Pharmaceuticals, which supported their claim of no suppression of facts and thus, the larger period invocation was not justified.Judgment Analysis:The Tribunal found merit in the appellants' arguments. It held that the waste generated during tyre manufacture did not lose its duty-paid character and was covered under Rule 57D(1). The Tribunal also noted that the exemption under Notification No. 53/88 was applicable as the polyethylene film was duty-paid. The Board's circular and trade notice supported the appellants' case, indicating that the material was not required to be charged with any amount of duty. The Tribunal concluded that there was no suppression of facts, making the demand time-barred. Consequently, the impugned order was set aside, and the appeal was allowed.