2005 (2) TMI 125 - SC - Central Excise

Waste - Demand - Limitation - Misdeclaration - Polyester chips - Valuation and classification - Appeal to Supreme Court

Summary

Issues Involved:
1. Classification of "sweeping wastes" under Chapter Heading 39.15 (waste) or Chapter Heading 39.07 (Primary Form of Plastic) of the Central Excise Tariff Act, 1985.
2. Invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944.

Detailed Analysis:

1. Classification of "Sweeping Wastes":

The primary issue in this appeal is whether the product termed by the assessee as "sweeping wastes" should be classified under Chapter Heading 39.15 (waste) as claimed by the assessee or under Chapter Heading 39.07 (Primary Form of Plastic) as contended by the department.

- Assessee's Argument: The assessee, a manufacturer of partially oriented yarn of polyester and polyester chips, argued that during the manufacturing process, some chips fell off during the bagging stage and were collected as "sweeping wastes". The assessee claimed that these wastes were unusable and thus should be classified under sub-heading 3915.90.

- Department's Argument: The department issued a show cause notice alleging that the polyester chips emerged from the granulators as a complete product and their spillover could not be treated as manufacturing waste. The department contended that such spillage did not qualify as "waste" under Heading 39.15 and demanded duty for clearance of polyester chips as "wastes" during the specified period.

- Adjudicating Authority's Decision: The Adjudicating Authority concluded that the spilled chips were not classifiable as "waste". It was noted that any contamination of the chips after their manufacture did not change the nature of the product. The authority relied on statements from company managers and rejected the claim for a "nil" rate of duty under Notification No. 14/92-C.E., confirming the demand.

- Tribunal's Decision: The Tribunal upheld the Adjudicating Authority's order, confirming the demand raised by the department but remitted the matter to the Commissioner, Central Excise, to decide on the benefit claimed under Notification No. 14/92-C.E.

- Supreme Court's Analysis: The Court analyzed Chapter 39 of the Central Excise Tariff Act, 1985, which deals with plastics and articles thereof, focusing on Chapter Headings 39.07 and 39.15. The Court noted that Chapter 39 is divided into primary forms and waste, parings, and scraps. The Court referenced previous judgments emphasizing that goods must be marketable in the condition they emerge and that the classification should consider the technical and scientific nature of the product.

- Conclusion: The Court concluded that the spillage of chips after emerging from the granulators were goods by themselves and did not cease to be polyester chips due to dust contamination. The Court found no reason to disturb the technical finding that the spilled chips could not be termed as "waste". The classification under Heading 39.07 was upheld, and the appeal on this issue was dismissed.

2. Invocation of Extended Period of Limitation:

The second issue concerns the department's invocation of the extended period of limitation under the proviso to Section 11A(1) of the Central Excise Act, 1944.

- Assessee's Argument: The assessee argued that the department was not entitled to invoke the extended period of limitation as they had filed classification lists and price lists, including purchase orders of buyers, and no inspection or investigation was conducted before approving these lists. The assessee claimed that they had disclosed all relevant facts and were not guilty of willful suppression.

- Supreme Court's Analysis: The Court noted that no such arguments were advanced before the Tribunal. The only argument presented was on excisability and the nil rate of duty. The Court observed that the classification list did not specify the various stages at which the so-called "wastes" had emerged, despite the assessee's claim that wastes emerged at different stages of production.

- Conclusion: The Court found no merit in the assessee's arguments and upheld the Tribunal's decision. The invocation of the extended period of limitation by the department was deemed appropriate, and the appeal on this issue was dismissed.

Final Judgment:
The civil appeal was dismissed with no order as to costs. The Supreme Court upheld the classification of the spilled chips under Chapter Heading 39.07 and validated the department's invocation of the extended period of limitation.