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Issues: (i) whether the revenue could raise a new contention in appeal that the cable scrap was not dutiable at all and therefore the exemption was unavailable, and (ii) whether the plastic scrap retained by the respondent was entitled to exemption under Notification No. 53/88-C.E. when the scrap arose from inputs on which Modvat credit had been taken.
Issue (i): whether the revenue could raise a new contention in appeal that the cable scrap was not dutiable at all and therefore the exemption was unavailable.
Analysis: The original controversy proceeded on the footing that the scrap was not to be treated as duty paid because the inputs had suffered Modvat credit. The appellate record and the show cause notice did not raise the distinct case that the cable scrap was wholly non-dutiable. A party cannot be permitted to shift to a materially different factual and legal basis at the appellate stage when that case was never pleaded or examined below.
Conclusion: The new contention was rejected and could not be entertained in appeal.
Issue (ii): whether the plastic scrap retained by the respondent was entitled to exemption under Notification No. 53/88-C.E. when the scrap arose from inputs on which Modvat credit had been taken.
Analysis: The exemption entry in Sl. No. 24 was treated as covering plastic scrap generated from goods on which appropriate duty had been paid, without the restrictive composition requirement found in another entry. The lower appellate authority had found that the duty-paid character of the inputs was not lost merely because Modvat credit had been taken, and the Tribunal accepted that reasoning. The revenue's reliance on removal of the scrap under Rule 57F(2) did not displace the finding that the exemption condition was satisfied.
Conclusion: The plastic scrap retained by the respondent was held to be entitled to the exemption and not chargeable under the residuary entry pressed by the revenue.
Final Conclusion: The demand was not sustained, and the assessee's exemption claim was upheld.
Ratio Decidendi: Where an exemption entry turns on the duty-paid character of the goods, that character is not lost merely because Modvat credit was availed on the inputs, and a new factual or legal basis cannot be introduced for the first time in appeal to defeat the exemption.
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