TaxTMI 
TaxTMI 
2011 (7) TMI 413
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....er, curiously, order dated 07.12.2007 was not complied with. Consequently, by yet another order dated 09.11.2009, this court directed the Tribunal to submit a statement of case within four weeks of receipt of its order. Accordingly, a fresh statement of case has been received by us. 3. The facts gleaned from the statement of case indicate that the appellant before us at the relevant point in time manufactured aerated water which fell under chapter 22 of the Central Excise Tariff Act, 1985 (hereinafter referred to as the 'said Act') at the relevant point in time. For the purposes of its business, the appellant, it appears procured duty paid glass bottles, on lease basis, from various suppliers which were used for the purposes of manufacturing its final products, i.e., aerated water. 3.1 In this context the dispute of the appellant with the revenue thus pertains to the following two kinds of transactions: 3.2 The first set of transactions being sale of glass bottles, which evidently, either broke or were rendered unusable due to constant use during the course of bottling of aerated water. These bottles were treated as waste and / or scrap by the appellan....
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.... framed to seek an opinion of this court. 7. Mr Jain, who appeared for the appellant has argued that in so far as the first transaction is concerned, which pertains to sale of waste and/or scrap comprising of broken bottles and / or unusable bottles, the provisions of Section 57F(5) of the Central Excise Rules, 1944 (hereinafter referred to as 'Rules') has been applied. It is argued that the said Rule, i.e., Rule 57F(5) would have no applicability as the appellant is not in the business of manufacturing glass bottles; the only use to which the glass bottles supplied to it are put to IS to fill aerated water; which is, the final product manufactured by the appellant. It is submitted that the question of payment of duty on waste and/or scrap comprising of broken and/or unusable glass bottles, would arise only if the appellant was the manufacturer of the glass bottles. 7.1 It was also argued by Mr Jain that the chapter sub-heading under which duty was sought to be levied (i.e., sub-heading no. 7001.10) pertained to "cullets and other waste and scrap of glass" and not broken and unusable glass bottles. It was sought to be argued that glass bottles were not cullets a....
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....ich were used by it to fill and market thereafter aerated water; being the final product. It is during the course of the handling of such glass bottles that they either broke or become unusable due to constant re-use. This breakage and /or re-use generated waste and/or scrap of such like glass bottles. It was further contended that admittedly such glass bottles which were dealt as waste and/or scrap were sold by the appellant admittedly, at least, twice or three times a week. Therefore, the revenue has correctly invoked the provisions of sub-rule (5) of Rule 57F,as it was waste which arose on processing of inputs in respect of which MODVAT credit had been availed of and therefore, could be removed only on payment of duty. The argument that the appellant was not the manufacturer of glass bottles did not arise since, the appellant had availed of MODVAT credit by treating the glass bottles as inputs. The expression used in rule 57F(5) was 'processing of inputs', which covered the fact situation obtaining in the instant case and, therefore, any waste as a consequence of the same could be removed only on payment of duty. 8.2 As regards the second set of transactions which invo....
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....r officer in writing regarding the quantity of such waste and the date on which he proposes to destroy at least seven days in advance and after observing all such conditions as may be prescribed by the Collector of Central Excise by a general or special order with regard to the manner of disposal of such waste." 10. It is quite evident that sub-clause (a) of clause (5) of Rule 57F would require removal of waste which arises from processing of inputs (in respect of which MODVAT credit has been availed of) only on payment of duty. In contradistinction clause (b) provides for removal of waste without payment of duty, only where it belongs to such class or category of waste as the Central Government may from time to time specify in its order, for the purpose of being used in the manufacture of the class or categories of goods as indicated therein. The question, therefore, which arises for consideration is whether waste and/or scrap which has arisen in the instant case by virtue of breakage of glass bottles or their constant re-use, in respect of which undoubtedly MODVAT credit has been claimed, can be removed without the payment of duty notwithstanding the fact that the appel....
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....eived. Cullet, according to the plain dictionary meaning, is nothing but recycled waste material or broken glass used in glass making. The heading 7001 when read with the sub-heading clearly indicates that the sub-heading takes within its ambit every kind of waste generated from glass. If the intention of the legislature was to confine to waste of the nature of cullets then it need not have inserted in the sub-heading the word 'cullet' and 'other waste'. The expression of 'other waste' would then be a surplusage. Thus we are not inclined to accept this contention made on behalf of the appellant. We find no infirmity with the conclusion arrived at by the authorities below, on this aspect of the transaction. 13. This brings us to the second set of transactions which involves sale of glass bottles. In this case the value of glass bottles removed/cleared amount to Rs.1,04,85,610/-. As indicated above, the period during which clearance/removal of glass bottles took place spanned between 1992 to 1995. The revenue has sought to impose excise duty in the sum of Rs.36,19,247/-. It is not in dispute that in this case as well, MODVAT credit has been claimed by the appellan....
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....ngement to the leasing company is repeated as in the previous cycle. Therefore, the entry in the balance sheet towards profit, on account of sale of bottles is only on account of transactions entered into between the leasing company and the party on account of leasing tie-up and not on account of actual sale of bottles. The physical possession of the bottles is not parted with remains only with the party for use." (emphasis is ours) 15. The question which arises for our consideration is as to whether the word 'removal' would require a physical removal of goods in the case of the transaction at hand. Rule 57F deals with the manner of utilization of inputs and the credit allowed in respect of the duty paid on such inputs. Sub-rule (i) of rule 57F(1) clearly provides that inputs in respect of which credit of duty has been allowed under Rule 57A may be used in or in relation to manufacture of the final products for which inputs had been brought into the factory of the appellant. Sub-clause (ii) of Rule 57F(1) permits removal from the factory of inputs for home consumption or for export only on payment of excise duty which, in no case can be less than the credit allowed in res....
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.... virtue of the aforementioned show cause notice. The Commissioner while passing the adjudication order confirmed the demand raised in the show cause notice. 15.2 The assessee being aggrieved preferred an appeal to the Tribunal contending that there was no violation of the MODVAT credit rules since the capital goods formed part of the captive power unit which had not been removed from the premises of the assessee where, the unit was installed. The Tribunal concurred with the stand taken by the assessee and hence proceeded to set aside the order of the Commissioner. 15.3 The revenue being aggrieved preferred an appeal to the High Court. The High Court was thus called upon to answer the following substantial question of law: "Whether the Tribunal was justified in holding that the capital goods in respect whereof MODVAT credit was availed by the assessee company were not removed by it from the premises of its factory even though it sold the entire power unit to M.s Tata Electric Company for a consideration of Rs 90 crores and leased to the said purchaser for 20 years the premises wherein the unit was installed and thus it did not contravene any provisions ....
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....at the Tribunal without application of mind and without proper appreciation of the said transactions in the light of the relevant provisions of the Central Excise Act, 1944 and the Rules has allowed the appeal of the assessee-company and set aside the Order-in-Original passed by the Commissioner of Central Excise, Belgaum. In the circumstances, we answer the above question of law in the 'negative' and against the assessee." (Emphasis is ours) 15.5 A similar view appears to have been taken by the Northern Bench of the Tribunal, at New Delhi in the case of Majestic Auto Ltd. vs Commissioner of Central Excise, Ghaziabad 2004 (173) ELT 145 (Tri-Delhi). The Tribunal in the said case was construing the provisions of Rule 57S. the said Rule reads as follows: "may be (i) used in the factory of the manufacturer of the final products; or (ii) removed, after intimating the Assistant Commissioner of Central Excise having jurisdiction over the factory and after obtaining dated acknowledgement of the same, from the factory for home consumption or for export for payment of appropriate duty of excise leviable thereon or for export under bond, as if the capital goods have been m....