1988 (3) TMI 198 - AT - Central Excise

Summary

Issues Involved:
1. Eligibility for benefit under Notification No. 16/82-C.E., dated 14th February 1982.
2. Interpretation of the term "manufactured out of" in relation to the use of waste and virgin chips in manufacturing polyester fibre.

Issue-Wise Detailed Analysis:

1. Eligibility for benefit under Notification No. 16/82-C.E., dated 14th February 1982:

The appellants sought partial exemption from duty under Notification No. 16/82-C.E., which applies to polyester fibre manufactured from waste by the process of recycling. The department rejected the claim, arguing that the fibre was not manufactured exclusively from waste, as the raw material comprised 4% waste and 96% virgin chips. The Collector of Central Excise (Appeals), Madras, upheld the Assistant Collector's view.

The appellants argued that the point at issue is covered by the Supreme Court decisions in Aluminium Corporation of India Limited v. Union of India & Others and Union of India & Others v. Tata Iron & Steel Co. Ltd., Jamshedpur, as well as the Madras High Court decision in Indian Organic Chemicals Ltd. v. Union of India and Others. The department contended that these cases are not applicable as they involved different factual scenarios and the principle of not charging duty twice on the same material.

2. Interpretation of the term "manufactured out of" in relation to the use of waste and virgin chips in manufacturing polyester fibre:

The appellants contended that the benefit under Notification No. 16/82-C.E. should not be denied merely because the polyester fibre was manufactured from a mix of waste and virgin chips. They argued that the term "manufactured out of" should not be interpreted to mean exclusively out of waste. They cited the Supreme Court's interpretation in Aluminium Corporation of India Limited and Tata Iron & Steel Co. Ltd., where it was held that proportionate relief should be granted even if non-duty paid material is used along with duty-paid material.

The department argued that the Supreme Court decisions were based on the principle of avoiding double taxation on duty-paid material, which is not applicable in this case. They maintained that the fibre made from 4% waste and 96% virgin chips does not qualify for the exemption.

Judgment:

The Tribunal agreed with the appellants' interpretation, stating that the term "manufactured out of" does not imply exclusive use of waste material. The Tribunal noted that the Supreme Court and Madras High Court had previously held that proportionate relief should be granted even if non-specified material is used along with specified material. The Tribunal emphasized that unless a notification specifically requires exclusive use of specified material, the benefit cannot be denied if other materials are also used.

The Tribunal allowed the appeal, holding that the appellants are entitled to the benefit under Notification No. 16/82-C.E. The orders of the lower authorities were set aside, and the Tribunal directed that the benefit should be granted pro rata based on the proportion of waste used in the manufacture of polyester fibre.