TMI Blog2007 (6) TMI 112X X X X Extracts X X X X X X X X Extracts X X X X ..... s permitted for export as well as for clearance to DTA were mutilated rags, garneted fibre and shoddy yarn. (c) During the period till 28-2-2005, there was no heading or sub-heading for rags in 6 digits in Central Excise Tariff. (d) From 1-3-05, there is heading 73.10 which covers rags but the column regarding rate of duty in the various sub-headings are left blank in the Tariff. The appellant has taken the view before the Commissioner that the rags having been mentioned in the Central Excise Tariff, the same should be treated as excisable goods notwithstanding the fact that against the rate of duty column, it has been left as blank. (e) Commissioner has held that rags cannot be held to be excisable and therefore, no excise duty was chargeable in respect of the same and the appellant would not be eligible to exemption from Customs duty under Notification No. 52/2003-Cus., dated 31-3-2003 in respect of the inputs which were used in the manufacture of non- excisable finished products, which in turn, were cleared to DTA. (f) Commissioner, while charging customs duty on the input namely unmutilated worn clothing used for obtaining the rags gave abatement of the central excise d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clause is subject to "anything repugnant in the subject or context". As held by the Hon'ble Supreme Court in several decisions, in view of the repugnancy clause has to be construed in the light of the context, scheme and object of the Act instead of ascribing the meaning as literally set out in the definition - (1997) 2 SCC 53. If the context does not permit or would lead to absurd or unintended result, the definition clause should not be mechanically applied - (1994) 2 SCC 434. The internal context and the external have to be seen for a meaningful construction so that no arbitrary or unjust result follows - (1990) 2 SCC 134. The interpretation of the definition clause should not also lead to any other provision becoming otiose - (1987) 2 SCC 707 and (2000) 2 SCC 451. It must harmonise with the subject of the enactment and the object which the Legislature has in view - (2004) 8 SCC 387. 5. Learned SDR reiterated the findings and reasonings of the Commissioner. 6. We have carefully considered the rival submissions. In several of the tariffs, wastes have been mentioned in the Central Excise as liable to duty. Will a mere mention in the tariff heading sufficient to levy duty? ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cified in the 1st or 2nd Schedule to the Central Excise Tariff, 1985 as being subjected to a duty of excise. Second, the process of production of goods must be a manufacturing process and third the product must be market able. 7. The Assessee in their reply to the show cause notice and at the time of personal hearing have explained the elaborate process by which the unmutilated worn clothings are converted into rags which are further used for pulling out the fibre from them by garneting. The un-mutilated worn clothing and the rags are two different products and therefore the conversion of un-mutilated worn clothings into rags has to be treated as the process of manufacture. The condition of marketability is also satisfied as the rags have a market which is clear from the fact that they are being sold into DTA. But the problem is the first condition that the goods must be specified in the 1st or 2nd schedule to the Central Excise Tariff Act, 1985 as being subjected to a duty of excise. 7.1 During the period upto 28-2-05, the old 6 digit Central Excise Tariff was in force. In this Tariff i.e. 1st schedule to the Central Excise Tariff Act, 1985, as in force upto 28-2-05, there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 1st Schedule unless same rate of duty including Nil rate has been mentioned for them as per definition of the excisable goods in Section 2(d) of the Act." However, for the period prior to 1-3-05, Commissioner observed that the rags would be considered excisable goods only if they were mentioned in the 1st or second Schedule. The above observations of the adjudicating authority are self explanatory. Further, for the period post-1-3-05, when rags are admittedly mentioned the tariff, he is rejecting the a on the ground that no rate of duty is mentioned against them I find that the legislature by way of additional note to the General Rule Interpretation of the Schedule in respect of Central Excise Tariff (Amendment) Act, 2004, has legislated that - "(c) "tariff item" means a description of goods in the list of tariff provisions accompanying either eight-digit number and the rate of the duty of excise or eight-digit number with blank in the column of the rate of duty;" 15. As such, it is clear that even if the goods described in the tariff carry blank in the colunm of the rate of duty, they have still to be considered as tariff item. This was so also observed by Hon'ble Supreme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er (Judicial) (Pronounced in the Court on 27-4-07) 17. [Order per : M.V. Ravindran, Member (J)]. - In view of the difference of opinion between the members of Division Bench, the matter has been referred for the opinion of the 3rd Member on the following point :- "Whether the appeal has to be rejected in toto as held by learned Member (Technical) or the same is to be partially allowed and partially re 18. Heard both sides and considered the submissions made at length on the point. The issue involved in this case is, whether the appellant is eligible for the benefit of Notification No. 52/03-Cus., dated 31-3-2003 read with proviso to paragraph 3 of the said notification, on the imported goods. 19. The appellants imported unmutilated worn clothing and subjected the same to mutilation and subjected to garneting, which requires fibre to be pulled out, and subsequently the final fibre after blending were spun into yarn which were used in the manufacture of final product. After such garneting the remnants were mutilated rags which were cleared by the appellants, into DTA as per the licence granted by DGFT, without payment of duty. The demand of duty is on the imported unm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, is of no consequence as the appellants had relied upon various decisions which were indicative that the product should be classified under Heading 63.07. In the absence of any challenge to the finding that there was a process of manufacture, we cannot go into the same on appeal filed by the assessee against the impugned order. Hence the question whether the rags are excisable products or not, has to be considered by the adjudicating authority after applying the ratio of various judgments of this Tribunal. In the absence of any findings, in my considered opinion remanding the matter to the adjudicating authority is the only option 22. As regards the dutiability/excisability of the products after 1-3-2005 the learned Member (Judicial) has correctly considered the additional note to General Rules of Interpretation of the Schedule in respect of Central Excise Tariff (Amendment) Act, 2004, to the interpretation that even if the goods described in tariff carry blank in the column of rate of duty, they have still to be considered as tariff item. As the learned Counsel correctly points out that the Hon'ble Supreme Court has considered the definition of the excisable goods as prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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