TMI Blog1995 (9) TMI 194X X X X Extracts X X X X X X X X Extracts X X X X ..... ning, inter alia, to polyurethanes in primary form is cleared without payment of duty in the factory itself for consumption in the manufacture of p.u. articles as aforesaid under exemption notification 217/86 since the final products - articles of cellular p.u. - are dutiable under Tariff sub-heading 3912.11 read with Notification 54/88-C.E., dated 1-3-1988 (as amended). 1.3 Prior to January 1990, the respondents were paying duty on the aforesaid `skins and other waste, parings and scrap (WPS) arising during the course of manufacture of articles of cellular p.u. foam under Sl. 6 of the table to Notification 54/88. For better appreciation the extracts from Notification 54/88 are reproduced below : Polyurethanes In exercise of the powers conferred by sub-rule (1) of rule 8 of the Central Excise Rules. 1944, the Central Government hereby exempts goods of the description specified in column (3) of the table hereto annexed and falling under heading Nos. or sub-headings of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as are specified in the corresponding entry in column (2) of the said Table from so much of the duty of excise leviable thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te. Dispute is whether the WPS arising in the form of top, bottom and side skins of p.u. foam block is liable to nil rate of duty in terms of Notification 53/88-C.E. 1.6 Collector C.E.(Judicial) has allowed the contention of the respondents herein. Hence, the present application under Section 35E of the Central Excises Salt Act, 1944, as on the direction of the Central Board of Excise Customs to be treated as appeal before us. 1.7 For appreciation of the controversy, we reproduce relevant extracts of Notification No. 53/88 :- In exercise of the powers conferrd by sub-rule (1) of Rule 8 of the Central Excise Rules, 1944, and in supersession of the notification of the Government of India in the Ministry of Finance (Department of Revenue) No. 132/86-Central Excises, dated the 1st March, 1986, the Central Government hereby exempts goods of the description specified in column (3) of the Table hereto annexed, and falling under Heading Nos. or Sub-heading Nos. of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as are specified in the corresponding entry in column (2) of the said Table, from so much of the duty of excise leviable thereon which is specified in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not relevant for deciding the controversy in question-whether Notification 53/88 or Notification 54/88 governs the rate of duty on WPS. 3.1 On the other hand, learned advocate Sh. Vinay Garg for the respondents has urged that the two Notifications 53/88 and 54/88 are different in character and operate for different products. Notification 53/88 speaks of WPS of all plastics whereas Notification 54/88 speaks only of WPS of flexible p.u. foam. Top, Bottom and side skins of a p. u. foam block are either not foamed at all or are only partially foamed. These are hard in character and by no means can be treated as WPS of flexible p.u. foam. Therefore, the WPS under consideration fall outside the scope of Notification 54/88. 3.2 On the other hand, the WPS in the form of top, bottom and side-skins satisfy the term of Notification 53/88 fully.There is no reason whatsoever to deny the benefit of the said notification. It is admittedly WPS of plastic, p.u. being a plastic. It arises from duty paid polyol and isocyanide. Therefore condition of the Notification 53/88 is fully satisfied. 3.3 On the other hand, he submits that the Revenue s contention is self-contradictory. Top, bottom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal allowed the contention of the I.O.C. for allowing the benefit of notification imposing lower burden of duty. 4.3 We, however, observe that there is no sufficient force in the appellant s plea that removal of p.u. foam block under Notification 217/86 for captive consumption would mean that the p.u. foam block has not already paid the duty leviable thereon. This position is now well settled in Patna High Court s judgment in the case of Tata Yodogawa Ltd. Another v. UOI Others [1987 (32) E.L.T. 521 (Patna)]. This judgment has been followed by the Tribunal in a series of judgments e.g. 1990 (49) E.L.T. 284 1988 (35) E.L.T. 142. A question in Tata Yodogawa arose whether ingots, which were exempted from payment of duty if melting scrap ( from which such ingots were manufactured) had already paid duty, would still be entitled to exemption if the scrap used in manufacture of such ingots was fully exempted. It was held that ingots would still be entitled to exemption because the scrap had already paid the duty which was contracted to be paid or which ought to have been paid in view of the exemption on scraps. 4.4 In view of the above discussion we hold that benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstead of clearing them on payment of duty under Notification 54/88 as was being hitherto done by the respondents. It is also alleged that this tendency on the part of the respondents started after filing revised classification list claiming exemption under Notification 53/88. We do not see any offence in this scheme or intention of the respondents, even if it be true, particularly after upholding respondents contention of applicability of Notification 53/88 to top skin, bottom skin and side skins. 6. Hence, in sum, we dismiss the appeal of the Revenue. Sd/- (P.C. Jain) Member (T) [Assenting Order per : G.P. Agarwal, Member (J)]. My order is as follows : 7. The respondents M/s. Maruti Foam (P) Ltd. are engaged in the manufacture of articles of Cellular/Flexible Polyurethane Foam which are cleared on payment of duty. For this purpose they imported plastics in primary form that is to say Polyol and isocyanide and cleared the same on payment of customs duty and the additional duty at appropriate rate. The first product which comes out in their plant is blocks of Polyurethane Foam of irregular shape in primary form which are not fully foamed and have an uneven surface ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondents inter alia on the ground that as per [the] condition of the Notification No. 53/88 (Sl. No....) nil rate of duty on waste, parings and scrap of plastics falling under Tariff Heading 39.15 is applicable only if such waste paring and scrap of plastics arise from goods on which the duty of excise leviable thereon or the additional duty as the case may be has already been paid and since in the instant case blocks of Polyurethane Foam of irregular shape in primary form falling under 3909.60 were removed for captive consumption under Notification No. 217/86, dated 1-3-1986 without payment of duty on the condition that final product shall be cleared on payment of duty, the benefit of the said Notification No. 53/88 cannot be extended. However, the Collector of Customs and Central Excise, Meerut dropped the said demand holding that the waste and scrap of plastics enjoys the benefit of exemption Notification No. 53/88. Hence the present appeal by the Revenue. 8. Arguing on behalf of the Revenue Shri Siddarth Kak, Jt. CDR submitted that admittedly the blocks of Polyurethane Foam of irregular shape in primary form falling under Tariff Item 3909.60 and attracting duty at the spec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by-products, waste or residue emerging at intermediate stage and known as intermediate product. But it appears that this was also not brought to the notice of the Bench in the case of M/s. Tirupati Foams Pvt. Ltd., supra. 10. I have considered the submissions. The following facts stand established from the record in the instant case : (i) that the respondents imported plastic material on payment of duty for manufacture of articles of cellular/flexible polyurethane foam: (ii) that the first product which came out of their plant was blocks of Polyurethane Foam of irregular shape in primary form which were not fully foamed and have an uneven surface and stiff and hard sides skins classifiable under Heading 3909.60 and attracting Central Excise duty at the rate specified therein, but the same were cleared for captive consumption as inputs for manufacturing the articles of cellular/flexible Polyurethane Foam as exempted goods under Notification No. 217/86, dated 1-3-1986; (iii) that in the course of manufacture of final product i.e. articles of cellular/flexible Polyurethane Foam some waste and scrap is generated. First at the stage, when uneven surface and stiff and hard sid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case law and the Notification it was held that, the condition that the goods should not be fully exempted was with reference to the final product only and not to the by-products, waste or residue emerging at intermediate stage and, therefore, set off of duty paid on the input could not be denied or reduced even on that part which was contained in the waste or by-product generated during the manufacture of final product. In the case of Detergents India Ltd. v. Collector of Central Excise, 1992 (61) E.L.T. 310 it was held by this Tribunal that there is nothing in the Rules to suggest that Modvat Credit could be taken only for that portion of the inputs which got consumed in the manufacturing process. Under the Rules the inputs may be used in or in relation to the manufacture of the final product. For the purpose of Modvat Rules, it makes no difference if the whole of the material put in the manufacturing stream has not got consumed and that in the nature of the manufacturing process part of it has emerged as a product which is described as spent acid. In fact, sub-rule (1) 57D of Central Excise Rules itself states that credit of specified duty allowed in respect of any inputs shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of the goods is given). Whereas Notification No. 54/88 applies to waste, parings scrap of Flexible Polyurethane Foam. (See Col. No. 3 of Table attached to it wherein the description of the goods has been given). In the instant case it is not in dispute that after the issuance of Trade Notices as aforesaid in 1989 the waste, that is to say top, bottom and side skins is classifiable as waste, parings and scrap of plastics. In this view of the matter the arguments of the ld. Jt. CDR that the Notification No. 54/88 is special since it speaks of part exemption and Notification No. 53/88 is general and, therefore, Notification No. 54/88-C.E. should prevail upon Notification No. 53/88-C.E. cannot be accepted. 14. Now coming to the question of fulfilling the condition of the Notification No. 53/88, it was contended by the Ld. Jt. CDR that the removal of blocks of Polyurethane Foam of irregular shape in primary form for captive consumption at nil rate of duty under Notification No. 217/86 would mean that the said irregular Polyurethane Foam blocks in primary form have not already paid the duty leviable thereon. I am afraid this argument cannot be accepted, since this position is now ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om primary dyes in this case are entitled to exemption under Notification No. 180/61 even though the primary dyes had availed full exemption of duty under Notification, No. 71/78 or 80/80. An extract of the opinion of the Ministry of Law is enclosed. The Board has accepted the opinion of the Ministry of Law". Annexure-II-Extracts from notes recorded by Ministry of Law : Exemption under Notification 180/61 will be available if and only if such dyes are manufactured from any other dye on which Excise duty or countervailing customs duty has already been paid". The crucial words in the exemption notification are duty has already been paid . The two interpretations possible are that it might mean duty which has actually been paid or which ought to have been paid. We are dealing with a case where no duty is payable in respect of certain goods by virtue of exemption notifications. If these goods are assessed to duty, the duty payable would be nil. In this context, reference may be made to the definition of `assessment in Rule 2(1)(a) of the Central Excise Rules, 1944 which means assessment of duty by the proper officer and includes reassessment, provisional assessment under Ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellants are not claiming the benefit of Notification No. 53/88 on the ground that the impugned goods that is to say WPS results from inputs on which appropriate duty has been paid at the time of importation. As regards the additional ground raised by M/s. Maruti Foam (P) Ltd. in that case the expression `the duty of excise leviable thereon used in Notification No. 53/88 also includes `nil rate of duty , the Tribunal rejected the same by observing as follows : Considered. It is not disputed that no duty is paid on the uncut polyurethane foam block from which the impugned waste material has arisen. If the plea of the appellant were to be accepted, Notification 54/88 will become redundant and hence such an interpretation is to be avoided. 4. This view is supported by the provisions of Notification No. 217/86 which exempts inputs captively consumed for further manufacture by including a proviso that provided that nothing contained in this notification shall apply to inputs used in or in relation to the manufacture of final products which are exempt from whole of the duty of excise leviable thereon or is chargeable to nil rate of duty. Hence, the waste material under reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manner for the entire WPS without bringing to the notice of the Bench that there are two types of waste which occurs at two different stages, i.e. at the first stage when uneven surface and stiff hard skin known as top skin, bottom skin and side skin are removed from the semi foamed PU foam block of irregular shape and size in primary form. And later waste occurs when these flexible PU foamed blocks of regular shape and size are shredded and cut to size for manufacturing the final products, namely, articles of flexible PU foam. In the instant case, the said distinction has been brought to the notice of the Bench stating that cut of skins is distinct from WPS of Flexible P.U. Foam arising in the course of manufacture of articles from flexible/cellular P.U. Foam left after cutting of the top, bottom and side skins and in the instant case the assessee is admitting that the later waste is liable to discharge duty in terms of Notification No. 54/88 and in fact they are paging it whereas in the case of M/s Tirupati Foam (P) Ltd. the assessee therein was claiming the benefit of Notification No. 53/88 for this later waste also; and (iv) that the Bench while passing the order did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot perceived by the court or present to its mind. The Court may consciously decide in favour of one party because of point A, which it considers and pronounces upon. It may be shown, however that logically the court should not have decided in favour of the particular party unless it also decided point B in his favour; but point B was not argued or considered by the Court. In such circumstances, although point B was logically involved in the facts and although the case had a specific outcome, the decision is not an authority on point B. Point B is said to pass sub silentio . A good illustration is Gerard v. Worth of Paries, Ltd. (K). There a discharged employee of a company, who had obtained damages against the company for wrongful dismissal, applied for a garnishee order on a bank account standing in the name of the liquidator of the company. The only point argued was on the question of the priority of the claimant s debt, and, on this argument being heard, the Court of appeal granted the order. No consideration was given to the question whether a garnishee order could properly be made on an account standing in the name of the liquidator. When, therefore, this very point was arg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the orders recorded by the learned brothers S/Shri P.C. Jain and Shri G.P. Agarwal. I am unable to agree with the finding arrived at by the learned members that the disputed Waste Paring and Scrap arising from the top, bottom, and side skin of polyurethane foam block is eligible for the exemption under Notification No. 53/88-C.E. I am, therefore, recording the following order : 23. From the facts outlined in the order recorded by the learned brother Shri P.C. Jain, it is seen that polyurethane block as it comes out of plant is liable to duty under Tariff sub-heading 3909.60 pertaining inter alia to polyurethane in primary form . Notification No. 53/88-C.E. reproduced in para 1.7 of the order recorded by the learned Member (Technical) covers Waste, Paring, and Scrap of plastic falling under sub-heading 39.15 which under the said notification attracted nil duty subject to the condition specified in column 5 of the notification. As recorded by the learned Member (Technical) in para 3.1 of his order the main ground on which the learned advocate on behalf of the respondents has claimed that the disputed Waste, Paring, and Scrap cannot be treated as covered by Notification No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... produced below it is seen that Heading 39.15 does not apply to Waste, Paring and Scrap of single thermoplastic material which is transformed into primary form : 7. Heading No. 39.15 does not apply to waste, parings and scrap of a single thermoplastic material, transformed into primary forms (Heading Nos. 39.01 to 39.14) On a combined reading of Notes 6 and 7 to Chapter 39 it follows that the disputed Waste, Paring and Scrap arising as a result of the removal of the hard outer top skin, bottom skin and side skin of polyurethane block of irregular shape which arises at the first stage in the course of manufacture of polyurethane foam article and which is treated as polyurethane in primary form would be classifiable under Tariff sub-heading 3909.60 and not under sub-heading 39.15 which was specified in column 2 of Notification No. 53/88 and it would also not be covered by the description of goods in the said notification, namely `Waste, Paring or Scrap of plastics" occuring in column 2 of the said notification. In view of the foregoing, I am inclined to agree with the stand taken by the Revenue in grounds (a)(1) to (3) of their appeal memo which is reproduced below :- (a) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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