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2016 (8) TMI 433 - DELHI HIGH COURT

2016 (8) TMI 433 - DELHI HIGH COURT - 2016 (339) E.L.T. 533 (Del.) - Classification - Section 3(1) of the Customs Tariff Act, 1975 (CTA)- payment of excise duty in respect of tyre scrap cut into two to three pieces produced from used and old tyres - clarification dated 2nd January 2015 issued by the Tax Research Unit (“TRU”) of the Department of Revenue, Ministry of Finance - availability of exemption - Crumb Rubber Modified Bitumen - the cutting and punching of tyres unfit for consumption or ma .....

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Act, 1944 and whether the decision of this Court in Modi Rubber Limited v. Union of India 1987 (29) ELT 502 (Del) requires to be reconsidered. This will in turn determine if CVD can be levied on the cut tyre pieces imported by the Petitioner - petition placed before the Hon'ble Chief Justice. - W.P. (C) 1268/2015 & CM APPL. 2251/2015 - Dated:- 8-8-2016 - S. Muralidhar And Najmi Waziri, JJ. For the Petitioner : Mr. V. Lakshmikumaran, Ms. Charunya Lakshmi Kumara, Mr. Abhishek Anand, Mr. Aditya Bha .....

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ise duty in respect of tyre scrap cut into two to three pieces produced from used and old tyres and that, therefore, the said goods are chargeable to additional customs duty or countervailing duty ( CVD ) under Section 3(1) of the Customs Tariff Act, 1975 (CTA). 2. This is the second round of litigation. The Petitioner had earlier filed W. P. (C) No. 8160 of 2014 in this Court when its representation dated 11th August 2014 made to the Government of India protesting against the imposition of 12% .....

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Ltd. vs. Union of India: 1999 (108)E.L.T. 321 (SC) and Commissioner of Central Excise and Customs, Bhubneshwar-I vs. Tata Iron and Steel Co. Ltd:2003 (154) E.L.T. 343 (SC) be also considered. We direct accordingly. In view of the statement made by the learned counsel for the respondent Nos. 1 and 2, no further directions are necessary in this writ petition. The same stands disposed of." 3. It is pursuant to the above order that the impugned clarification was issued by the TRU on 2nd Januar .....

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crumb rubber with bitumen to make Crumb Rubber Modified Bitumen ( CRMB ). It is stated that the roads made of CRMB have a better quality and life. It is stated that CRMB is being made worldwide by mixing radial tyre crumb. However, there is scarcity of discarded radial tyres in India as a majority of the tyres produced are cross ply and non-radial tyres. Therefore, the Petitioner has to depend on imported radial tyre scrap from buses and trucks. According to the prevalent import policy, import o .....

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igher than transportation of tyres cut into two or three pieces. 5. Referring to the CTA and the Customs Tariff Heading, it is pointed out by Mr. V. Lakshmikumaran, learned counsel for the Petitioner that it is importing the aforementioned tyres cut into two-three pieces, classifying them under the Customs Tariff Heading 4004, according to which the Petitioner has to pay 12% CVD. It is pointed out that CVD is payable only if identical goods manufactured domestically suffers excise duty. Accordin .....

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ound unfit for consumption or marketing, to turn them into waste/scrap does not result in manufacture of waste material and, therefore, no duty can be levied thereon. 6. Mr Lakshmikumaran also placed reliance on the decision of the Customs, Excise and Gold Control Appellate Tribunal ( CEGAT ) in Gujarat Reclaim & Rubber Products Ltd. v. Collector of Central Excise & Customs, Bombay 1983 (14) ELT 2401 (Tri - Delhi), in which it was held that the crushing of waste rubber into powder does n .....

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ding that the powder is secured by a mere process of crushing but also that the crushed product was not a new product. This is essentially a finding of fact. Likewise the decision of the CEGAT in Elgi Rubber Products Ltd. v. Collector of Central Excise, Madras 2002 (145) ELT 112 (Tri - Del.) was also affirmed with the Supreme Court dismissing the appeal on the ground of delay and Gujarat Reclaim & Rubber Products Ltd. v. Commissioner of Central Excise, Pune 2009 (243) E.L.T. 426 (Tri. - Mumb .....

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er was obtained from old tyres amounted to manufacture. The twin test of manufacture and marketability would still apply. 8. In reply, it is submitted by Mr. Anurag Ahluwalia, learned Standing Counsel for the Union of India that the test for determining if the cutting of old tyres into two or three pieces amounts to manufacture was to ask if the processes to which the old tyre was subjected to resulted in transformation of the old tyre into a new product having a different identity, characterist .....

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unt to manufacture. He referred to the decisions in Commissioner of Central Excise, Bangalore-II v. Osnar Chemical Pvt. Ltd. 2012 (276) ELT 162 (SC); CIPLA Ltd. v. Commissioner of Central Excise, Bangalore 2008 (225) ELT 403 (S.C.) and Union of India v. Delhi Cloth & General Mills Co. Ltd. 1977 ELT (J 199). 10. The central question that arises in this petition is whether CVD at 12% can be levied on the import of tyre scrap cut into two or three pieces . For the purpose of the said question t .....

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g on the business of manufacture and sale of tyres and other rubber products. The said goods were being manufactured at its factory at Modipuram. In the process of such manufacturing, a small quantity of rubber compound was rejected due to wrong mixing or overheating. MRL claimed that the rejected rubber compound was in the nature of waste. At various stages of the manufacture, some quantity of rubber cuttings emerged which were also treated as waste. The substandard and defective goods were des .....

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manipulation by the petitioner Company whereby a new and different article, emerges. At various stages of the manufacture of tyres, tubes, flaps and other rubber products which are admittedly, goods manufactured, rubber cuttings and waste is generated and comes into existence. The process whether essential or incidental or ancillary to fall within the ambit of the expression 'manufacture' is one which must have some relation to the manufacture of a finished product. The waste/scrap is o .....

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it cannot be equated with any finished product. There is a change but every change in the raw material is not manufacture. There is no transformation in case of waste/scrap of a new and different article. No one has brought into, existence a new substance having a distinctive name, character or use. xxxx xxxx xxxx xxxx xxxx xxxx 10. Rule 49 of the Central Excise Rules, 1944 (hereinafter referred to as the Rules), provides for duty chargeable only on removal of the goods from the factory premises .....

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permission and fulfilment of such conditions as may be imposed by the Collector. For claiming remission of duty on such goods, a procedure has been laid down in Chapter 42 of the Central Excise Law Guide. Separate procedure has been prescribed under other statutory provisions for the destruction or disposal of waste, refusal or unsaleable material arising out of goods brought under Rule 56A or under Chapter X or under Rule 173-K, 137-N and 173-P. The list showing the excisable commodities and t .....

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existence during the process of manufacture, then the only method employed by the petitioner himself is of destruction by cutting and punching to turn it into waste/scrap. There is no event of manufacture of waste matter and thus no duty can be levied thereon. 11. It is the common case that waste/scrap are capable of fetching some sale price but that cannot be the criterion for the event of manufacture. There are several commodities mentioned in the said para 42.07. Manner and method of destruc .....

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acture of waste within the meaning of the Act. It is also not the department's case that they have classified all the destroyed items of Para 42.07 as "goods" liable to excise duty under Tariff Item 68 of C.E.T. There is no reason as to why the destroyed tyres by cutting and punching be treated as "goods" manufactured. 13. In Modi Rubber Limited v. Union of India (supra), tyres were being manufactured and as a part of that process waste or scrap was generated by cutting a .....

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rketable and are, in fact, sold for being used in road laying, etc. The question that would then arise is whether in such an instance it could be said that there is no 'manufacture'. Although the decision in Modi Rubber Limited v. Union of India (supra) does not directly address the above issue, it appears that in para 11 of the decision the Court was conscious of waste matter being put to use by recycling or other use. The Court observed but there is no event of manufacture of waste wit .....

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