Duty - waste yarn price

[RAMESH ANANTHAKRISHNAN]

We are having a 100% EOU where we produce Plastic spools by injection moulding process and rewind of monofilament yarn in various dia meters. We buy monofilament yarn from the local source and also importing from other countries. After completing the winding operation there may be slight quantity of monofilament yarn is left on the parent bobbin which we can't use. Hence we are clearing the yarn waste with proper intimation to the Customs authorties. Duty is being paid on the basis of waste yarn price as per the market condition but Customs authorities are insisting us to make the duty payment as per the imported yarn price. Kindly advise whether customs authorities views are right. If not what we have to do now?

[Mukesh Kumar]

Wastage norms are provided in SION. If the wastage is within permission limit, department should not insist payment of duty on value of imported yarn price. Where SION is not specified wastage is allowed upto 2%. Department can deny the benefit in case of wastage is generated before production stage. But from the query it appears that wastage is generated during the course of manufacturing process and hence must be allowed upto the permissible limit.

[RAMESH ANANTHAKRISHNAN]

Thanks for your reply. I forgot to mention one point in my querry. Basically we have been permitted to manufacture plastic spools by injection moulding process and whatever the waste generation from this process we are reusing the same. Whereas the monofilament is not manufactured by us. We are just rewind the yarn from bulk package to small packages. In this situation shall we return the waste/unusable yarn to the supplier (in case the supplier in India otherwise we may destroy the waste). Kindly advise. Regards A.RAMESH

[RadheyShyam Mangal]

Scrap / waste / remnants is defined which arise out of production process or in connection therewith. In my opinion the slight quantity of monofilament yarn which is left on the parent bobbin is well within the definition of scrap hence u can sell it as per para 6.8 (e) of FTP read with para 6.6(e) HBP.

AI Summary

Customs valuation of waste yarn: duty should follow market waste price when wastage occurs during manufacturing within permitted norms. Duty on leftover monofilament yarn used in rewinding should be based on market waste value where the loss occurs during production and is within SION wastage allowances (or the default two percent where SION is silent). Waste generated before production may be excluded from the concession. Residual yarn on parent bobbins constitutes scrap/remnant arising from production and may be sold or otherwise disposed of under FTP provisions rather than charged at the imported yarn invoice value.