TaxTMI 
TaxTMI 
2007 (6) TMI 112
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.... no heading or sub-heading for rags in 6 digits in Central Excise Tariff. (d) From 1-3-05, there is heading 73.10 which covers rags but the column regarding rate of duty in the various sub-headings are left blank in the Tariff. The appellant has taken the view before the Commissioner that the rags having been mentioned in the Central Excise Tariff, the same should be treated as excisable goods notwithstanding the fact that against the rate of duty column, it has been left as blank. (e) Commissioner has held that rags cannot be held to be excisable and therefore, no excise duty was chargeable in respect of the same and the appellant would not be eligible to exemption from Customs duty under Notification No. 52/2003-Cus., dated 31-3-2003 in respect of the inputs which were used in the manufacture of non- excisable finished products, which in turn, were cleared to DTA. (f) Commissioner, while charging customs duty on the input namely unmutilated worn clothing used for obtaining the rags gave abatement of the central excise duty wrongly paid by the appellant and demanded the differential duty of Rs. 74,17,772/- relating to the period from October 2004 to November 2005. However....
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....clause has to be construed in the light of the context, scheme and object of the Act instead of ascribing the meaning as literally set out in the definition - (1997) 2 SCC 53. If the context does not permit or would lead to absurd or unintended result, the definition clause should not be mechanically applied - (1994) 2 SCC 434. The internal context and the external have to be seen for a meaningful construction so that no arbitrary or unjust result follows - (1990) 2 SCC 134. The interpretation of the definition clause should not also lead to any other provision becoming otiose - (1987) 2 SCC 707 and (2000) 2 SCC 451. It must harmonise with the subject of the enactment and the object which the Legislature has in view - (2004) 8 SCC 387. 5. Learned SDR reiterated the findings and reasonings of the Commissioner. 6. We have carefully considered the rival submissions. In several of the tariffs, wastes have been mentioned in the Central Excise as liable to duty. Will a mere mention in the tariff heading sufficient to levy duty? Such mention is definitely necessary before excise duty can be levied, but mere mention is not sufficient. It is to be remembered that excise duty is a duty....
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.... a manufacturing process and third the product must be market able. 7. The Assessee in their reply to the show cause notice and at the time of personal hearing have explained the elaborate process by which the unmutilated worn clothings are converted into rags which are further used for pulling out the fibre from them by garneting. The un-mutilated worn clothing and the rags are two different products and therefore the conversion of un-mutilated worn clothings into rags has to be treated as the process of manufacture. The condition of marketability is also satisfied as the rags have a market which is clear from the fact that they are being sold into DTA. But the problem is the first condition that the goods must be specified in the 1st or 2nd schedule to the Central Excise Tariff Act, 1985 as being subjected to a duty of excise. 7.1 During the period upto 28-2-05, the old 6 digit Central Excise Tariff was in force. In this Tariff i.e. 1st schedule to the Central Excise Tariff Act, 1985, as in force upto 28-2-05, there was no heading or sub-heading at all for any type of rags or even for the worn clothings. Therefore, for the period upto 28-2-05 there is no doubt that no Centr....
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....e period prior to 1-3-05, Commissioner observed that the rags would be considered excisable goods only if they were mentioned in the 1st or second Schedule. The above observations of the adjudicating authority are self explanatory. Further, for the period post-1-3-05, when rags are admittedly mentioned the tariff, he is rejecting the a on the ground that no rate of duty is mentioned against them I find that the legislature by way of additional note to the General Rule Interpretation of the Schedule in respect of Central Excise Tariff (Amendment) Act, 2004, has legislated that - "(c) "tariff item" means a description of goods in the list of tariff provisions accompanying either eight-digit number and the rate of the duty of excise or eight-digit number with blank in the column of the rate of duty;" 15. As such, it is clear that even if the goods described in the tariff carry blank in the colunm of the rate of duty, they have still to be considered as tariff item. This was so also observed by Hon'ble Supreme Court in case of Associated Cement Co. Ltd. v. CC reported in 2001 (128) E.L.T. 21 (S.C.) = 2001 (4) SCC 593. By referring to the Supreme Court's decision, in case of Vazir....
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....bsp; Sd/- (M. Veeraiyan) (Archana Wadhwa) Member (Technical) &nbs....
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....arly indicates that, if the finished goods are either non excisable or leviable to nil rate of duty including rejects, waste, scrap, remnant of and by-products the benefit of notification is not available to the goods imported by E.O.U. 21. It is seen from the record that the adjudicating authority in paragraphs 6, 7 and 7.1 of order-in-original had categorically come to the conclusion that the appellants had undertaken elaborate process for drawing fibres by way of garneting which were pulled out of worn clothing and spun into yarn resulting in two products i.e. yarn and rags. It is also noticed that the Revenue has not challenged these findings of the Commissioner as regards that the appellants had undertaken a process which would amount to or can be treated as process of manufacture. It is undisputed that the rags which arise in the factory of the appellant is a resultant item after the elaborate process is undertaken by the appellants on the imported worn clothing. In the absence of any challenge to these findings, the said finding attain finality, inasmuch it is accepted by the Revenue that mutilated rags are coming out of the process which is to be treated as manufacture. ....
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.... as re ported in 2000 (119) E.L.T. A178 (S.C.). 23. It is undisputed that the imported unmutilated worn cloth cannot be cleared by the appellants from his factory as rags, as the rags and worn clothing are two different commodities. If due to process of garneting and removal of fibres from worn clothing, the resultant product being a different commodity, i.e. rags it would mean that the said rags came into existence due to the process of garneting i.e. to say that they were the resultant product of a process which is incidental or ancillary to the manufacture of product. If that be so, the undisputed fact of manufacture cannot be considered at the appeal stage in the absence of any challenge to those findings. 24. For the foregoing reasons, I find myself concurring with the findings of the Member (Judicial) and it is opined that the appeal is to be partially allowed and partially remanded as held by the Hon'ble Member (Judicial). 25. The file is returned to the original Bench for passing majority order. (Pronounced on 8-6-2007). Sd/- (M. V. Ravindran) Member (Judicial) FINAL ORDER 26. In view of the majority decision, the appeal is partly allowed and partial....