TaxTMI 
TaxTMI 
TaxTMI 
2017 (5) TMI 183
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....r Article 226 of the Constitution of India, by Tinna Rubber & Infrastructure Limited questions the validity of a clarification dated 2nd January 2015 issued by the Tax Research Unit ('TRU') of the Department of Revenue, Ministry of Finance to the effect that there was no exemption from payment of excise duty in respect of tyre scrap cut into two to three pieces, produced from used and old tyres, and that, therefore, the said goods are chargeable to additional customs duty or countervailing duty ('CVD') under Section 3(1) of the Customs Tariff Act, 1975 (CTA). 3. The Petitioner states that it is one of the largest importers of used and old tyres. It is stated that it uses such used and old tyres to manufacture "crumb rubber". When the tyres reach a stage where they can no longer be used for automobiles, they are sold to scrap dealers, who then sell them to processors. The old tyres are thereafter recycled. One beneficial way to recycle the tyres is to mix crumb rubber with bitumen to make Crumb Rubber Modified Bitumen ('CRMB'). It is stated that the roads made of CRMB have better quality and life. CRMB is being made worldwide by mixing radial tyre crumb. However, there is scarcity ....
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.... out that the Petitioner would have to pay 12% CVD thereon only if identical goods 'manufactured domestically' is exigible to the levy of excise duty. He submits that the cutting of old tyres into two or three pieces does not and cannot be said to be 'manufacture' within the meaning of Section 2 (f) of the Central Excise Act 1944 (CE Act). Therefore, the question of such imported used and old tyres being subject to CVD does not arise. 8. Mr. Lakshmikumaran submitted that the issue stood covered in favour of the Petitioner by the decision of the Division Bench of this Court in Modi Rubber Limited, v. Union of India 1987 (29) ELT 502 (Del). He pointed out that the said decision had in fact been considered by the Supreme Court of India in Union of India v. Ahmedabad Electricity Co. Limited (2003) 11 SCC 129 and had been impliedly approved by it. He also relied on the decisions in Collector of Central Excise v. Tata & Iron & Steel Co. Limited 2004 (165) ELT 386 (SC), Collector of Central Excise v. Indian Aluminium Co. Ltd. 2006 (203) ELT 3 (SC), Servo-Med Industries Pvt. Ltd. v. CCE, Mumbai (2015) 14 SCC 47 and Collector of Central Excise v. Technoweld Industries 2003 ....
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....ntity, characteristics and use. He pointed out that the old tyre ceased to remain as such when it was subjected to the process of cutting which resulted in two or three pieces of tyres which had a distinct identity and were marketable as such. 12. Mr. Ahluwalia submitted that Tariff Entry No. 4004 acknowledged that all waste, pairings and scrap of rubber including powder and granules obtained therefrom were distinct commodities obtained by subjecting old tyres to the process of cutting. Therefore, the process of cutting the old tyres did amount to manufacture. He referred to the decisions in Commissioner of Central Excise, Bangalore-II v. Osnar Chemical Pvt. Ltd. 2012 (276) ELT 162 (SC); CIPLA Ltd. v. Commissioner of Central Excise, Bangalore 2008 (225) ELT 403 (S.C.) and Union of India v. Delhi Cloth & General Mills Co. Ltd. 1977 ELT (J 199). He also referred to the decision in Cipla Limited v. Commissioner of Central Excise, Bangalore 2008 (225) ELT 403 (SC). The central issue 13. The central question that arises in this petition is whether CVD at 12% can be levied on the import of 'tyre scrap cut into two or three pieces'. Incidental to it, the further question that requires ....
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.... emerged which were also treated as waste. The substandard and defective goods were destroyed by cutting and punching. MRL's contention was that since there was no manufacture of the waste, no excise duty was leviable thereon. 16.2 This Court in Modi Rubber Limited v. Union of India (supra) considered whether such waste "arising during the processing of tyres should be classifiable under Tariff item 16-A(2) or 68 of the Central Excise Tariff." Inter alia the Division Bench observed: "8. It cannot, however, be said that waste/scrap is the result of any treatment or any labour or any manipulation by the petitioner Company whereby a new and different article, emerges. At various stages of the manufacture of tyres, tubes, flaps and other rubber products which are admittedly, goods manufactured, rubber cuttings and waste is generated and comes into existence. The process whether essential or incidental or ancillary to fall within the ambit of the expression 'manufacture' is one which must have some relation to the manufacture of a finished product. The waste/scrap is obtained not by any process of manufacture but in the course of manufacturing process to produce the end pr....
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....hich are found unfit for consumption or for marketing by the petitioner himself. After such goods have come into existence during the process of manufacture, then the only method employed by the petitioner himself is of destruction "by cutting and punching" to turn it into waste/scrap. There is no event of manufacture of waste matter and thus no duty can be levied thereon. 11. It is the common case that waste/scrap are capable of fetching some sale price but that cannot be the criterion for the event of manufacture. There are several commodities mentioned in the said para 42.07. Manner and method of destruction in case of each Tariff Item given there is different. In some cases it is by burning, in others, it is by cutting or breaking into small pieces. The ash by burning or small pieces may have a market value. It is sold as a waste product like rubbish undesired and unwanted with a view to get rid of it. It is no argument that it fetches some money that it cannot be considered as waste. These days waste matter is put to a lot of use by recycling or other treatment, but there is no event of manufacture of waste within the meaning of the Act. It is also not the department's ca....
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....s involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufacturing process either on its own or in conjunction or combination with other raw materials. Since coal is not a raw material for the end product in all the cases before us, the question of getting a new identity as an end product due to manufacturing process does not arise." 17.4 In arriving at the above conclusion, the Supreme Court referred to its earlier decisions in Ujagar Prints (II) v. Union of India (1989) 3 SCC 488, CCE v. Technoweld Industries (supra), CCE v. Rajasthan State Chemical Works (1991) 4 SCC 473 and CCE v. Ballarpur Industries Limited (1989) 4 SCC 566. It was categorically held: "Burning of coal for purposes of producing steam cannot be said to be a manufacturing activity. Therefore, neither ash nor cinder can be said to be products of a manufacturing process. From burning coal when you get either cinder or ash, it cannot be said that a new product had emerged. Cinder remains coal. In fact, the Department has itself describ....
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.... relevant time. Since the dross and skimmings were sold in the market it was argued that they were a marketable commodity and should be subject to levy of excise duty. The court observed that these were nothing but waste or rubbish which is thrown up in the course of manufacture. This judgment also answers the argument of the learned counsel for the appellant based on Khandelwal Metal's case (Supra) wherein brass scrap produced during manufacturing of brass goods was considered to be liable to excise. In the present case cinder though sold for small price cannot be said to be a marketable commodity in the sense the word "marketable" is understood. Due to sheer necessity cinder has to be removed from the place where it occurs because unless removed it will keep on accumulating which in turn lead to loss of precious space." 17.8 The decision of the Supreme Court ultimately hinged on its conclusion that "cinder does not satisfy the test of being manufactured in India." It was added that even if the said commodity was saleable "it does not make any difference." 17.9 There can be no manner of doubt that by referring to the decision of Modi Rubber Limited v. Union of India (supra) and ....
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.... the Tariff. It was, however, well-settled that even if some percentage of the metal was found in the dross, that would not, in the absence of something more in the entry, make it an excisable article. It was further held that "the term 'manufacture' implies a change. Every change, however, is not a manufacture. Every change of an article may be the result of treatment, labour and manipulation. But manufacture would imply something more. There must be a transformation; a new and different article must emerge having a distinctive name, character or use." 21. The legal position was reiterated in Commissioner of Central Excise, Lucknow v. WIMCO Limited 2007 (217) ELT 3 (SC) which arose in the context of waste, scrap and parings of paper and paperboard generated during manufacture of printed paperboard boxes. It was held that though the impugned items were classifiable under sub-heading 4702.90 of the Central Excise Tariff Act, and were dutiable, that by itself could not make them excisable unless 'manufacture' was involved. 22.1 In Servo-Med Industries Private Limited v. Commissioner of Central Excise, Mumbai (supra) the question that arose for consideration before the Supreme Court....
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.... the goods remain exactly the same even after a particular process, there is obviously no manufacture involved. Processes which remove foreign matter from goods complete in themselves and/or processes which clean goods that are complete in themselves fall within this category. (2) Where the goods remain essentially the same after the particular process, again there can be no manufacture. This is for the reason that the original article continues as such despite the said process and the changes brought about by the said process. (3) Where the goods are transformed into something different and/or new after a particular process, but the said goods are not marketable. Examples within this group are the Brakes India case and cases where the transformation of goods having a shelf life which is of extremely small duration. In these cases also no manufacture of goods takes place. (4) Where the goods are transformed into goods which are different and/or new after a particular process, such goods being marketable as such. It is in this category that manufacture of goods can be said to take place." 22.6 Ultimately, it was held that the case before the Supreme Court fell under category (1)....