1983 (10) TMI 241 - AT - Central Excise

Summary

Issues Involved:
1. Whether the recovery of Caprolactum from wash water constituted manufacture.
2. Classification of Caprolactum under Item 14AA of the 1st Schedule to the Central Excises and Salt Act, 1944, and its assessability to duty.
3. Applicability of Notification No. 47/77, dated 1-4-1977.
4. Validity of the show cause notice for the review.

Detailed Analysis:

Issue 1: Whether the recovery of Caprolactum from wash water constituted manufacture.
The Tribunal examined whether the process of recovering Caprolactum from wash water could be considered as "manufacture." The process involved concentrating unreacted Caprolactum from wash water and depolymerizing oligomers into Caprolactum. The Tribunal concluded that this process results in the production of a commodity with a distinct name, character, and use, thus constituting manufacture. The Tribunal noted that "depolymerization also is a process of manufacture" and that the affidavits submitted by the Respondent concealed more than they revealed about the process.

Issue 2: Classification of Caprolactum under Item 14AA of the 1st Schedule to the Central Excises and Salt Act, 1944, and its assessability to duty.
The Tribunal held that manufactured Caprolactum is assessable to duty. The wash water contained both unreacted Caprolactum and oligomers. The process adopted by the Respondent not only concentrated the unreacted Caprolactum but also depolymerized the oligomers into Caprolactum. The Tribunal emphasized that oligomers are not the same as virgin Caprolactum, on which duty had previously been paid. Therefore, only the Caprolactum recovered from the depolymerization of oligomers is exigible to duty.

Issue 3: Applicability of Notification No. 47/77, dated 1-4-1977.
This issue was not argued before the Tribunal. Therefore, no specific finding was made regarding the applicability of Notification No. 47/77.

Issue 4: Validity of the show cause notice for the review.
The Tribunal held that the show cause notice issued for the review was in order. The notice was based on the tentative view that the recovery of Caprolactum from wash water amounted to manufacture and that the benefit of Notification No. 47/77 could not be availed because the Caprolactum was used in the manufacture of tyre cord, contrary to one of the conditions of the notification.

Conclusion:
The Tribunal set aside the Appellate Collector's order concerning the recovery of Caprolactum from wash water and remanded the matter to the Assistant Collector for quantification of the Caprolactum manufactured from the depolymerization of oligomers in wash water. Duty is to be levied only on the Caprolactum ascertained to have been manufactured from the depolymerization of oligomers. The appeal partially succeeded.