TMI Blog2015 (1) TMI 489X X X X Extracts X X X X X X X X Extracts X X X X ..... , 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le waste and scrap is sold on payment of Custom duty as required under sub section (2) of section 65 of Customs Act, 1962. However, they are not paying any duty in respect of quantity of burning loss. The show cause notices were issued demanding custom duty on the quantum of burning loss contending that in terms of section 65 (2) (b), the quantity of waste and scrap also included the short quantity said to be burning loss. In the Adjudication, the adjudicating authority confirmed the duty demand and interest and imposed penalty under section 116/117 of Customs Act, 1962. Aggrieved with the orders in original the appellant preferred appeals before Commissioner (Appeals). Ld. Commissioner (Appeals) vide orders in appeals dated 11/1/2005, 31/5/2005 and 25/10/2007 upheld the orders in original. Hence, the appellant is before me. 2. Shri T.C. Nair, Ld. Counsel for the appellant submits that dispute is limited to the issue, whether the burning loss arising out of the manufacturing process in the bonded warehouse is liable to custom duty. He submits that in terms of section 65(2)(b), it applies to physical waste and scrap arises during the manufacturing and cleared from the warehouse f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is leviable to custom duty in terms of section 65(2)(b) of Customs Act, 1962. As regard the claim of the appellant regarding the nature of burning loss and quantum thereof there is no dispute. The Raw material for manufacturing of Seamless pipe was imported by the appellant under notification no. 20/99 Cus dated 28/2/99 (Sr. NO. 183), which is reproduced below: In exercise of the powers conferred by sub-section (1) of section 25 of the Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public interest so to do, hereby exempts the goods of the description specified in column (3) of the Table below or column (3) of the said Table read with the relevant List appended hereto, as the case may be, and falling within the Chapter, heading No. or sub-heading No. of the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) as are specified in the corresponding entry in column (2) of the said Table, when imported into India, - (a) from so much of the duty of customs leviable thereon under the said First Schedule as is in excess of the amount calculated at the rate specified in the corresponding entry in column (4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccurring 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. The revenue contended that in terms of 65(2)(b) of Customs Act, 1962 the waste and scrap includes the burning loss also and such burning loss will also attract custom duty in the same manner as it is levied on waste and scrap. On carefully reading of Section 65(2)(b) of Customs Act, 1962, it applies only to such waste and scrap which resulted from manufacturing operations and are cleared from the warehouse for home consumption. In the present case the 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 n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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