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2023 (12) TMI 123
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....hing/grinding the used bottles, the same were return back to M/s Reliance Industries Ltd. for being further use in manufacture of the finished goods by M/s Reliance Industries. 2.2 It was alleged that processes of flaking/grinding of used PET bottles and washing of flakes do not amount to manufacture as defined under Section 2(f) of Central Excise Act and was also not one of the declared product as manufactured under Section 2(f) of the Central Excise Act. Revenue was of the opinion that the process amounting to manufacture and were subjected to nil rate of duty and the finished products were subjected to nil rate of duty as per Notification No.24/2012-CE dated 08.05.2012. Accordingly, the benefit claimed by the respondent in terms of Notification No.08/2005 would not be admissible to them. Accordingly, a show cause notice was issued to the respondent asking them to show cause as to why- "a) Service Tax, Ed. Cess and Secondary & Higher Ed. Cess, total amounting to Rs.52,46,844.00 should not be demanded and recovered from them under Section 73(1) of the Finance Act, 1994 along with interest payable under Section 75 of the Finance Act, 1994; and Late fee under Rule 7C of ....
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....ods supplied by the client (b) goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable 2.3 In the instant case, the party is supplying 'PET Flakes' to the Principal Manufacturer i.e. M/s Reliance Industries Ltd, who are utilising the same for manufacture of 'Polyster Staple Fibre' & 'Tow Polyster' falling under Chapter Heading No. 55 of the First Schedule to the Central Excise Tariff Act, 1985. 2.4 Vide Notification No. 24/2012-CE dated 08.05.2012 items falling under Chapter 54 & 55 of First Schedule to the Central Excise Tariff Act, 1985have been notified for 'Nil' rate of duty. 2.5 Consequently, the final products i.e. 'Polyster Staple Fibre' & 'Tow Polyster' (i.e. Items of Chapter 55 of the First Schedule to the Central Excise Tariff Act, 1985) being manufactured by the Principal manufacturer, utilizing the impugned 'PET Flakes'....
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....d during the course of argument. 4.2 Commissioner in the impugned order has concluded as follows:- "Summing up, it may be stated that the noticee are engaged in the activity of conversion of was PET bottles into PET Flakes and/ or washing of PET flakes. It is noticed that if the prosess of conversion of waste bottles into PET flakes is viewed as amounting to manufacture then the noticee are eligible to exemption under serial No 78 of Notification No 4/2006-CE dated 01.03.2006. Alternatively, if this process is not viewed as amounting to manufacture then the noticee are eligible for exemption from Service Tax under Notification No 8/2005-ST dated 01.03.2005. In view of the above discussion I hold that the processing of waste PET bottles into PET flakes does not amount to manufacture as the process of crushing, cutting and washing of waste PET Bottles does not result in emergence of a new distinct and identifiable product. Consequently the noticee would be entitled to the benefit of exemption from Service Tax under Notification No 8/2005-ST dated 01.03.2005 and the demand of Rs 52,46,844.00 is liable to be dropped being non sustainable in law." 4.3 Th....
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....2011 to March 2013." 4.5 Section 65 (19) of the Finance Act, 1994 defined Business Auxiliary Service as follows: (i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or (ii) promotion or marketing of service provided by the client; or Explanation. - ........ (iii) any customer care service provided on behalf of the client; or (iv) procurement of goods or services, which are inputs for the client; or Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client; (v) production or processing of goods for, or on behalf of the client; or (vi) provision of service on behalf of the client; or (vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision, and includes serv....
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....78 of Notification No. 4/2006-C.E., dated 1-3-2006. The said Sl. No. 78 of the notification is reproduced for ready reference : S. No. Chapter or heading or sub-heading or Tariff item of the First Schedule Description of excisable goods Rate Condition No. (1) (2) (3) (4) (5) ...... ....... ....... ....... ....... 78 3901 to 3914 Plastic materials reprocessed in India out of the scrap or the waste of goods falling within Chapters 39, 54, 55, 56, 59, 64, 84, 85, 86, 87, 90, 91, 92, 93, 94, 95 and 96 Explanation. - For the removal of doubts, it is hereby clarified that nothing contained in this exemption shall apply to plastic materials reprocessed in a free trade zone, a special economic zone or a hundred per cent export-oriented undertaking and brought to any other place in India 5.2 From the facts on record, it emerges that appellant in their reply dated 23-4-2010 to the SCN have informed that waste PET bottles are crushed and washed using mechanical force and converted into "flakes" which are then cleared to other manufacturers, who convert it to powder and cleared to manufacturer of PET bottles;....
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....ulk forms." 5.6 It is thus evident that primary forms for the purpose of Chapter 39 are constituent goods which are "primary" in form and meant to be converted by further polymerisation or chemical synthesis into other materials of Headings 3901 to 3914. This interpretation is reinforced by Chapter Note 3 which clarifies as under : "3. Headings 3901 to 3911 apply only to goods of a kind produced by chemical synthesis, falling in the following categories : (a) Liquid synthetic polyolefins of which less than 60% by volume distils at 300°C, after conversion to 1,013 millibars when a reduced pressure distillation method is used (Headings 3901 to 3902); (b) resins, not highly polymerised, of the coumarone-indene type (Heading 3911); (c) other synthetic polymers with an average of at least 5 monomer units; (d) silicons (Heading 3910) (e) resols (Heading 3909) of other prepolymers. 5.7 Discernably, the appellants are not doing any chemical synthesis or polymerization processes on the PET bottles used by them as raw material. On the other hand, the process involves only putting the used PET bottles into a crusher w....
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....hthalate may exist both as an amorphous [transparent) and as a semi-crystalline material. The semi-crystalline material might appear transparent [particle size < 500 mm) or opaque and white [particle size up to a few microns) depending on its crystal structure and particle size. PET is produced by the step-growth polymerization of ethylene glycol and telephthalic acid. But the M/s. SRP is not doing any polymerization process. The materials manufactured by the M/s. SRP are only parings of post-consumer PET Bottles. Just because it is used as input in recycling companies, of course after several mechanical processes, the same cannot be equated with PET in primary form. As per Chapter Notes No. 3 to Chapter 39 under Section VII of Central Excise Tariff clearly stated that - Headings 39.01 to 39.11, apply only to goods of a kind produced by chemical synthesis. As per point No. 1 of the General Rules for the interpretation of the schedule "for legal purposes, classification shall be determined according to the terms of the Headings and any relative Section or Chapter notes." The Tariff Heading 3915 applies to Waste, parings and scrap of plastics; the sub-headi....
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....es, had been undertaken by the assessee in respect of their fibre so as to bring the same within the ambit of this Chapter 54 or even Chapter 55 which are part of the First Schedule. The learned Commissioner (Appeals) has, in our view, rightly dropped the duty demand against the assessees on this ground. 5. The learned SDR has however, contended that the definition given in Chapter Note 1 to Chapter 54, should not be taken as exhaustive but only explanatory and that the fibre manufactured by the assessee, falls within the definition of "goods" and as, such is excisable and liable to duty. But we are unable to subscribe to the contention of the learned SDR. The Chapter Note 1, reproduced above, sets out the definition of man-made fibres for the purpose of bringing the same within the ambit of the First Schedule of the CETA. It gives an exhaustive and self-contained/self-defined, definition of the man-made fibres. Nothing can be subtracted or added to this definition and for bringing the "man-made fibres" within the scope of the First Schedule of the CETA, the processes detailed in this Chapter note, must be undertaken by an assessee. Therefore, even if it is taken ....
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....ET flakes. These PET flakes are then charged to extruders where they are melted and molten polymer is passed through spinnerets to obtain TOW. The tow is drawn and then cut into different lengths to obtain PSF. 6. As per Chapter Note 1 to Chapter 54, 1. Throughout this Schedule, the term "man-made fibres" means staple fibres and filaments of organic polymers produced by manufacturing processes, either: (a) by polymerisation of organic monomers to produce polymers such as polyamides, polyesters polyolefins or polyurethanes, or by chemical modification of polymers produced by this process [for example, poly (vinyl alcohol)prepared by the hydrolysis of poly (vinyl acetate)]; or (b) by dissolution or chemical treatment of natural organic polymers (for example, cellulose) to produce polymers such as cuprammonium rayon (cupro) or viscose rayon, or by chemical modification of natural organic polymers (for example, cellulose, casein and other proteins, or alginic acid), to produce polymers such as cellulose acetate or alginates. The terms "synthetic" and "artificial", used in relation to fibres, mean: synthetic: fibres as defined at (a); artific....
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....fore the Revenue authorities. In the written submissions and during the course of the argument, the Revenue took a forthright and categorical stand that the said decision is incorrect and per incuriam. Intention of the Revenue in paragraph 10 of the circular is apparent, Revenue authorities should not follow the decision of the CESTAT in GPL Polyfils Ltd. (supra). Paragraph 10 of the said circular is accordingly struck down. 16. However, one difficulty remains as pointed out by the counsel for the petitioners. It is stated that the hands of the authorities are bound and tied because of the impugned circular. It is submitted that the entire adjudication process would be a formality. It is further submitted that even if paragraph 10 of the circular is struck down, the damage and harm has been caused. There is merit in the contention of the petitioners in this regard. The situation, we think, can be redeemed by giving two directions. Firstly, the Revenue authorities will examine the contentions raised by the petitioners without being influenced or treating the circular as binding. The Revenue/adjudicatory authorities will independently apply their mind and take into considera....
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....985 with effect from the date of 37 B order. The text of Section 142 ibid is reproduced below: "142. Amendment of Chapter Notes to Chapter 54 or First Schedule. - (1) In the First Schedule to the Central Excise Tariff Act, in Chapter 54, after Note 1, the following Note shall be inserted and shall be deemed to have been inserted with effect from the 29th day of June, 2010, namely: - "1A. Notwithstanding anything contained in Note 1, man-made fibre such as polyester staple fibre and polyester filament yam manufactured from plastic and plastic waste including waste polyethylene terephthalate bottles shall be classified as textile material under Chapter 54 or Chapter 55, as the case may be.". (2) Any action taken or anything done or purported to have been taken or done for recovery of duty of excise at any time during the period commencing on and from the 29th day of June, 2010 and ending with the date on which the Finance Bill, 2012 receives the assent of the President (hereafter in this section referred to as the "specified period"), shall be deemed to be, and always to have been, for all purposes, as validly and effectively taken or done as if the amendme....
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....2006 (hereinafter referred to as the first notification) which was superseded vide number GSR 163(E), dated the 17th March 2012 (herein referred to as the second notification), issued under sub-section (1) of Section 5A of the Central Excise Act, shall, in so far as it relates to the first notification, stand amended and shall be deemed to have been amended retrospectively, in the manner as specified in column (2) of the Fifth Schedule, on and from - Notification No. and date Amendment Period of effect of amendment (1) (2) (3) G.S.R 95(E), dated the 1st March, 2006 (5/2006-Central Excise, dated the 1st March 2006) (1) In the said notification, in the Table, after serial number 2B and the entries relating thereto, the following serial number and entries shall be inserted and shall be deemed to have been inserted with effect from the date and up to the period specified in column (3), namely :- 29th June, 2010 to 16th March, 2012 (both days inclusive) (1) (2) (3) (4) (5) "2C 54 or 55 (1) Polyester staple fibre or polyester filament yarn....