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2015 (1) TMI 489 - AT - CustomsLevy of duty on burning loss - whether the burning loss arising in the manufacturing process carried out in the custom bonded warehouse is leviable to custom duty in terms of section 65(2)(b) of Customs Act, 1962 - Held that:- It can be seen from the notification and condition-35 appended thereto that the exemption in respect of raw material has been provided for manufacturing the goods in accordance with the provision of section 65 of the Customs Act, 1962. The burning loss is occurring during the course of manufacture of final product i.e. seamless pipes. The burning loss is nothing but quantity consumed in the manufacture and become invisible. Therefore, exemption notification is applicable even on the quantity of the burning loss. Burning loss does not exist physically, therefore it is neither capable of being cleared from the warehouse nor factually cleared from the warehouse. Therefore, the burning loss occurred in the manufacturing process is nothing but the consumption in the manufacture, though physically not available, hence, the same does not get cleared from the warehouse. With this fact, the burning loss will not fall under the clause (b) of Section 65(2). Accordingly, no duty can be charged on nonexistent quantity of burning loss. It is very important to note that in any processing industry, apart from recoverable waste and scrap, smaller part of the burning loss is also generated. Keeping this aspect into mind the legislators consciously made explicit provision for levy of custom duty on the waste and scrap, which is physically available and cleared from the warehouse. However, as regard the burning loss, no such explicit provision was made. This might be for the reason that the quantity of imported material consumed in the final product includes burning loss also as it has same nature as the raw material which gets consumed in the manufacturing of final product. I am therefore of the considered view that the custom duty cannot be charged on the quantity of the burning loss for two reasons – i.e. This quantity stands consumed in the manufacture of final product and it does not contain in the quantity of waste and scrap and second, it is not cleared physically for home consumption from the custom bonded warehouse. Quantity of burning loss, since, neither cleared out of the custom bonded warehouse for home consumption nor otherwise disposed of, but factually it got consumed in the manufacturing, no custom duty is leviable on the same. - orders of the lower appellate authority are unsustainable in the facts and in law, and the same are set aside - Decided in favour of assesse.
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