TMI Blog2011 (7) TMI 413X X X X Extracts X X X X X X X X Extracts X X X X ..... n order dated 23.07.2001 passed by this court the Central Excise Gold Tribunal, now referred to as Central Excise and Service Tax Appellate Tribunal (hereinafter referred to as 'Tribunal') had directed a reference in respect of the following question of law: "Whether the Tribunal was justified in its view regarding applicability of Rule 57F(1)-(5) of the Central Excise Rules, 1944." 2. It appears that pursuant to the order of this court dated 23.07.2001 a statement of case dated 03.10.2006 was submitted by the Tribunal. Since this court was not satisfied with the facts articulated in the said statement of case; vide order dated 07.12.2007 it had directed the Tribunal to submit an appropriate statement of case. However, curiously, order dated 07.12.2007 was not complied with. Consequently, by yet another order dated 09.11.2009, this court directed the Tribunal to submit a statement of case within four weeks of receipt of its order. Accordingly, a fresh statement of case has been received by us. 3. The facts gleaned from the statement of case indicate that the appellant before us at the relevant point in time manufactured aerated water which fell under chapter 22 of the C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above clearances having been made without payment of excise duty, penalty was also sought to be levied. 4.1 Upon receipt of the reply of the appellant, the Commissioner of Central Excise, Delhi - I (in short 'the Commissioner') passed an order-in-original dated 01.05.1998. The Commissioner confirmed the demand raised in the aforementioned show cause notice. 5. Being aggrieved by the order of the Commissioner, the appellant carried the matter in appeal to the Tribunal. The Tribunal by an order dated 31.07.2000, rejected the appeal preferred against the order of the Commissioner. 6. As indicated above, on a reference sought by the appellant, a question of law was framed to seek an opinion of this court. 7. Mr Jain, who appeared for the appellant has argued that in so far as the first transaction is concerned, which pertains to sale of waste and/or scrap comprising of broken bottles and / or unusable bottles, the provisions of Section 57F(5) of the Central Excise Rules, 1944 (hereinafter referred to as 'Rules') has been applied. It is argued that the said Rule, i.e., Rule 57F(5) would have no applicability as the appellant is not in the business of manufacturing gl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licability of a particular sub-heading and thereby in sum and substance impugning the rate of duty imposed or the value of goods, the present appeal would not be maintainable in view of the provisions of section 35L(b) of the Central Excise Act, 1994. Mr Satish Kumar submitted that in such an eventuality, appeal would lie to the Supreme Court and not with the High Court. 8.1 In so far as the first set of transactions was concerned, Mr Satish Kumar submitted that the finding returned by the authorities below ought to be sustained. It was submitted that it was not disputed that the appellant had availed of MODVAT credit on glass bottles which were used by it to fill and market thereafter aerated water; being the final product. It is during the course of the handling of such glass bottles that they either broke or become unusable due to constant re-use. This breakage and /or re-use generated waste and/or scrap of such like glass bottles. It was further contended that admittedly such glass bottles which were dealt as waste and/or scrap were sold by the appellant admittedly, at least, twice or three times a week. Therefore, the revenue has correctly invoked the provisions of sub-rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed; or (c) Be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use, or not worth the duty payable thereon, the duty payable thereon being remitted. Provided that such waste may be destroyed by the manufacturer governed by Chapter VIIA after informing the proper officer in writing regarding the quantity of such waste and the date on which he proposes to destroy at least seven days in advance and after observing all such conditions as may be prescribed by the Collector of Central Excise by a general or special order with regard to the manner of disposal of such waste." 10. It is quite evident that sub-clause (a) of clause (5) of Rule 57F would require removal of waste which arises from processing of inputs (in respect of which MODVAT credit has been availed of) only on payment of duty. In contradistinction clause (b) provides for removal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven this submission is misconceived. The heading 70.01 and sub-heading 7001.10 read as follows: "70.10: Cullet and other waste and scrap of glass; glass in the mass; glass in balls (other than microspheres of heading NO. 70.13); rods or tunes, unworked. 7001.10 Cullet and other waste and scrap of glass....." 12. A perusal of the heading and the sub-heading would show that it is far wider in scope than what is sought to be contended. The submission of Mr Jain that the waste and/or scrap of glass-bottles should be confined to the waste of the nature of cullets is misconceived. Cullet, according to the plain dictionary meaning, is nothing but recycled waste material or broken glass used in glass making. The heading 7001 when read with the sub-heading clearly indicates that the sub-heading takes within its ambit every kind of waste generated from glass. If the intention of the legislature was to confine to waste of the nature of cullets then it need not have inserted in the sub-heading the word 'cullet' and 'other waste'. The expression of 'other waste' would then be a surplusage. Thus we are not inclined to accept this contention made on behalf of the appellant. We find no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y takes place. It is only leasing arrangement between the party and the leasing companies as a measure of financial management. To illustrate the point, supposing, 100 bottles are taken on lease from a leasing company called X, a periodical (usually monthly) payment is made to the leasing company which is inclusive of their interest and other servicing charges. After the full payment of these 100 bottles has been made, the user company (in this case the party) technically sells (only on papers) bottles to the leasing company and the repayment arrangement to the leasing company is repeated as in the previous cycle. Therefore, the entry in the balance sheet towards profit, on account of sale of bottles is only on account of transactions entered into between the leasing company and the party on account of leasing tie-up and not on account of actual sale of bottles. The physical possession of the bottles is not parted with remains only with the party for use." (emphasis is ours) 15. The question which arises for our consideration is as to whether the word 'removal' would require a physical removal of goods in the case of the transaction at hand. Rule 57F deals with the manner of ut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 20 years from the date of the sale of the captive power unit. Since the assessee had sold the captive power unit on which it had availed MODVAT Credit, the excise authorities issued a show cause notice demanding payment of central excise duty in respect of the aforementioned capital goods under the provisions of Section 11A(2) and proviso to Section 11A(1) of the Central Excise Act, 1944 read with Rule 57AB(1)(b) and the explanation appended to the said Rules. Interest and penalty was also sought to be recovered from the assessee by virtue of the aforementioned show cause notice. The Commissioner while passing the adjudication order confirmed the demand raised in the show cause notice. 15.2 The assessee being aggrieved preferred an appeal to the Tribunal contending that there was no violation of the MODVAT credit rules since the capital goods formed part of the captive power unit which had not been removed from the premises of the assessee where, the unit was installed. The Tribunal concurred with the stand taken by the assessee and hence proceeded to set aside the order of the Commissioner. 15.3 The revenue being aggrieved preferred an appeal to the High Court. The High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o nothing short of physical removal of the power unit of the assessee in respect whereof MODVAT credit was availed by the assessee so as to attract the penal provisions of the said Act and the Rules. The said transactions of sale of power unit and simultaneous lease of premises are wisely resorted to by the assessee as a device to avoid the tax liability on it on the ground that the power unit was not physically removed from the premises of the assessee. Therefore, we are of the considered opinion that the Tribunal without application of mind and without proper appreciation of the said transactions in the light of the relevant provisions of the Central Excise Act, 1944 and the Rules has allowed the appeal of the assessee-company and set aside the Order-in-Original passed by the Commissioner of Central Excise, Belgaum. In the circumstances, we answer the above question of law in the 'negative' and against the assessee." (Emphasis is ours) 15.5 A similar view appears to have been taken by the Northern Bench of the Tribunal, at New Delhi in the case of Majestic Auto Ltd. vs Commissioner of Central Excise, Ghaziabad 2004 (173) ELT 145 (Tri-Delhi). The Tribunal in the said case was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in the case of Associated Cement Ltd. (supra). The submission of the appellant, if accepted, would render the purpose of the rule nugatory. In built in the Rule 57F(1)(ii) is the deeming fiction that goods are manufactured. The physical removal of the goods from the place of manufacture cannot be the criteria for subjecting the goods to imposition of excise duty as in our view such an interpretation would render the MODVAT scheme unworkable as it would give premium to an obvious attempt at evading tax. Even otherwise, the onus in these facts whether or not there had been physical removal would be on the assessee. 17. Before We conclude we may point out that in support of his submission pertaining to the second set of transaction Mr Jain had relied upon the judgment in the case of Indorama Synthetics (I) Ltd. vs Commissioner of Central Excise, Nagpur 2005 (190) ELT 193. The Western Zonal Bench of the Tribunal while deciding the issue involved had inter alia relied upon its own judgment in the case of Associated Cement Ltd. (supra) which was reversed by a Division Bench of the Karnataka High Court; a reference to which has been made by us hereinabove. Therefore, since ..... X X X X Extracts X X X X X X X X Extracts X X X X
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