TMI Blog2023 (12) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ries was Polyester staple fiber or polyester staple yarn subjected to nil rate of duty as per Notification No.24/2012. However, it is found that at no stage of investigation nor even at the filing of this appeal any evidence has been produced by the revenue to show that Reliance was clearing the finished products i.e. Polyester staple fiber or polyester filament yarn by availing the benefit of the notification. In absence of any evidence to this effect, the conclusion drawn in the appeal filed by the revenue cannot be substantiated. The Polyester staple fibre or polyester filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles was throughout exempted from payment of duty or attracted nil rate of duty. There could not have been any reason for limiting the applicability of Notification No 8/2005-ST dated 01.03.2005 from the 08.05.2012 the date of Notification No 24/2012-CE amending notification No 17/2012-CE dated 01.03.2012. Revenue has in its appeal restricted the demand of service tax from 08.05.2012. Further in its circular dated 29.06.2010, Board has in para 8 clarified multifarious uses of Polyester Staple Fibre etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 the Service Tax Rules, 1994 read with Section 70 of the Finance Act, 1994 should not be demanded and recovered from them; and b) Penalty should not be imposed upon them under the provisions of Section 76 of the Finance Act, 1994. c) Penalty should not be imposed upon them under the provisions of Section 77(1) (a) of the Act for contravention of Section 69 of the Finance Act, 1994. 2.3 This show cause notice has been adjudicated by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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' produced by the party cannot be construed to have been cleared by M/s Reliance Industries Ltd. upon payment of 'appropriate duty of Excise', as defined in the impugned Notification. As 'Nil' rate of Duty is not 'Appropriate Rate of Duty'. 2.6 Accordingly, it is evident that the condition mandated for exemption under Notification No. 8/2005-ST dated 01.03.2005 has not been fulfilled and hence, the party is not eligible to avail benefit thereof from 08.05.2012 onwards i.e. the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 The only ground which is raised by the revenue to counter the findings recorded by the Commissioner in the impugned order is that Polyester staple fiber/polyester Staple yarn was attract nil rate of duty as per exemption Notification No.24/2012-CE dated 08.05.2012. The proviso (2) of the said notification specifically provides that appropriate rate of duty would not include nil rate of duty or duty which is exempted for the purpose of the said notification. The benefit of this Notification No.8/2005 would not be admissible to respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods. Explanation - For the removal of doubts, it is hereby declared that for the purposes of this clause, - (a) Commission Agent . Respondent has before the Commissioner, contended that the activities undertaken by them amount to manufacture and hence he cannot be subject to levy of service tax under this category. Commissioner has after consideration of the submissions rejected the contentions of respondent and has concluded that activities undertaken by the res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 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; that the buyer of the product who converts the flakes to powder form is not paying Central Excise duty; that the product waste PET bottle flakes and waste PET bottles in powder form are the two stages of conversion of used and waste PET bottles into a new PET bottle for fresh usage; that since flakes are converted into PET ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s find that the important requirement for goods to be classified in Heading 39.07 is that they should be primary forms of plastics. What are primary forms is amplified in Chapter Note 6, which reads as under : 6. In Headings 3901 to 3914, the expression primary forms applies only to the following forms : (a) Liquids and pastes, including dispersions (emulsions and suspensions) and solutions; (b) Blocks of irregular shape, lumps, powders (including moulding powders), granules, flakes and similar bulk 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed pet bottles are only parings of post-consumer PET Bottles. As per assessee s own reply, pet flakes manufactured by them is further processed and converted into powder form by other companies before used by the recycling companies to manufacture pet bottles pet fibers in comparison, PET or Poly Ethylene Terephthalate in primary form is a thermoplastic polymer resin of the polyester family. Depending on its processing and thermal history, Poly Ethylene Terephthalate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filaments of organic polymers produced by manufacturing processes, either : (a) By polymerization of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives; or (b) By chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates. It remains undisputed that none of these processes, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ster. 5. The most common polyester for polyester staple fibre purposes is poly (ethylene terephthalate), or simply PET. This is also the polymer used for many soft drink bottles and it is becoming increasingly common to recycle them after use by re-melting the PET and extruding it as fibre. To manufacture Polyester staple fibre, used PET bottles are taken as inputs. They are crushed and converted into PET 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 exampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular cannot be sustained. Paragraph 10 of the circular states that the decision of the Tribunal in GPL Polyfils Ltd. (supra) would be relevant to the facts of that particular case and is not a binding precedent in other matters. It stipulates that even if the facts and the process are identical, other assessees cannot rely upon the decision in GPL Polyfils Ltd. (supra) before 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 me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by adopting coercive method till the stay application is decided by CESTAT. 4.7 To set all the issues at rest in respect of the classification of Polyester Staple Fibre obtained from the waste PET Bottles, by Section 142 of Finance Act, 2012, Chapter Note 1 A was introduced in the Chapter 54 of the First Schedule to Central Excise Tariff Act, 1985 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 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.06.2010 to 17.03.2012. The said section is reproduced below: 110. Amendment of notification number GSR 95(E), dated 1st March 2006 issued under Section 5A of Central Excise Act. - (1) The notification of the Government of India in the Ministry of Finance (Department of Revenue) number GSR 95(E), dated the 1st March, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the revenue in the appeal or at any stage of the proceedings to show that the finished goods of the M/s Reliance Industries Limited were cleared under exemption Commissioner has in para 23 of the impugned order observed as follows: 23. The Noticee have submitted that if their activity is not treated as manufacture of goods the same would be liable for exemption from Service Tax under Notification No 8/2005-ST dated 01.03.2005 as the PET flakes which are processed by them out of the waste PET bottles supplied by RIL and that the PET flakes are returned by them to RIL (principal) for mbeing used in the manufacture of Polyester Staple on which appropriate excise duty is being paid after clearance by the RIL. Further the range Officer, Superintendent Central Excise Range-I, Barabanki in his reported dated 16.07.2013 as inetralia informed that if the activity of job work is considered as service, the same is also exempted from payment of service tax under Notification No 8/2005-ST dated 01.03.2005 and 25/2012-ST dated 20.06.2012. 4.13 The exemption contained in the notification No 8/2005-ST which was rescinded by the Notification No 34/2012-ST extended by the entry at Sl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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