TMI Blog2017 (9) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... in controlled environment for the required use - Tribunal in J.C.T. Ltd. Vs. CCE, Jallandhar [2004 (4) TMI 359 - CESTAT, NEW DELHI] has held that if the product is captively consumed which does not require any packing nor any precaution is to be taken in respect of those products; this does not mean that the product loses the capacity of being marketed - Admittedly, non-virgin poly chips are in fact marketed and the appellants/assessee themselves indicated that M/s Suncity did market this product and wanted to compare the value of such sale for adopting to their excise valuation. Hence, we note that special packing required for removal of goods safely to the buyer, which is not required for captive consumption itself, cannot determine the marketability of any product - the batch non-virgin poly chips are excisable products. Benefit of N/N. 111/1995-CE dated 06/09/1995 - Held that: - It is apparent that the entire manufacturing process is aimed at producing main virgin poly chips. The technological necessity in the process results in a waste by-product in the form of wash water. In order to extract the available monomer/oligomer for further use from such wash water separate reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he entire quantity of caprolactam used as input in the manufacture of nylon polyamide chips are put to intended use. The unreacted or partially reacted caprolactam of 10% of total quantity is removed by hot wash. This results in emergence of wash water. Since, it contains recoverable monomer as well as oligomer the same is put to further process. We note that considering the process and the technical requirement, wash water cannot be considered as a manufactured product. Time limitation - Held that: - the Department is aware of the usage of various inputs in the manufacture of exempted yarn. The appellant/assessee relied upon letter dated 30/10/1991 issued by the Jurisdictional Superintendent of Central Excise as well as show cause notices dated 29/09/1993, 02/03/1994, 09/02/1995 and 26/05/1995 regarding disputed Modvat credit for exempted final product. In this situation, we note that the Department was aware of the manufacture of 210d yarn and various inputs used in such manufacture. The findings of the Original Authority that a particular nature of input used in the manufacture of 210d yarn is not known to the Department is not tenable. Appeal allowed in part and part matt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order dated 18/12/1997. Against this order, both SRF and Department preferred appeals before the Tribunal. The Tribunal vide final order No.1136/1998 dated 05/06/1998 set aside the impugned order and remanded the matter to the Commissioner for a fresh decision, to consider the claim of SRF for exemption. The appeal by Department also was remanded back vide final order No.624/2003 dated 04/08/2003 for a consideration of the valuation issue. 3. Apart from the above demands, periodical show cause notices to demand Central Excise duty as well as to deny Modvat credit on inputs with reference to manufacture of 210d yarn were issued. These notices covered periods from April 1997 to March 2002 and September 1994 to May 1995. Three more show cause notices were issued to demand duty on batch poly chips (nonvirgin chips) cleared to job workers. All these demand cum show cause notices were taken up together and decided by the Commissioner in terms of denovo direction of the Tribunal. The impugned order dated 31/03/2005 was issued by the Commissioner. The Commissioner held that : (a) batch poly chips are marketable ; (b) exemption under Notification 111/1995-CE and successor notifications i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not contesting the tax liability of main virgin poly chips, however, the method of valuation of such virgin chips for excise duty purpose is being contested. The submission of the learned Counsel may be summarized as below :- (a) the non-virgin batch poly chips are not marketable. They are obtained by polymerization in the factory of the appellant/assessee and are directly sent to respective silos. From there they are sent to respective machines for conversion into yarn. The chips are not packed in nitrogen blanketed containers. Without such special packing these chips cannot be marketed. Relying on the decisions of the Hon ble Supreme Court in Union of India Vs. Delhi Cloth and General Mills Co. Ltd. reported in 1997 (92) E.L.T. 315 (S.C.) and Bata India Limited Vs. CCE, New Delhi reported in 2010 (252) E.L.T. 492 (S.C.), the learned Counsel contested the duty liability of non-virgin batch poly chips ; (b) non-virgin poly chips originate from wash water which is classifiable under Chapter 39. Accordingly, exemption for such chips is available. Waste and scrap itself need not fall under Chapter 39 to claim such exemption. It is enough if the waste and scrap is ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not a manufactured commodity but a waste emerging during the course of manufacture of poly chips/yarn. The Department did not discharge the burden of proof of manufacture and marketability of wash water. The residue/ waste arising in the course of manufacture cannot be considered as a marketable commodity. Further, it is submitted that test reports do not support the case of the Department. Wash water is held to be not an excisable commodity by the Tribunal in the case of CCE, Bombay Vs. Nirlon Synthetic Fibres Chemicals Ltd. reported in 1983 (14) E.L.T. 2418 (CEGAT). The Hon ble Supreme Court in Nirlon Synthetic Fibres Chemicals Ltd. Vs. CCE reported in 1996 (86) E.L.T. 457 (S.C.) held that even the recovery of caprolactam from wash water is not manufacture . The appellant/assessee also contested the classification of wash water under CETH 3824. 9. Shri M.R. Sharma, the learned AR for Revenue while reiterating the main points in the impugned order submitted that the appeals by Revenue are on the point that the Original Authority should not have extended exemption benefit to batch non-virgin poly chips, on prorata basis, manufactured out of certain waste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d earlier in this order, SRF in the course of manufacture of tyre cord fabric produced nylon yarn of various deniers. Yarn of 210d is exempted from Central Excise duty. Hence, the issue arose regarding duty liability of poly-chips both virgin as well as non-virgin used in the manufacture of such exempted 210d yarn. The duty liability of such virgin poly chips captively used in the manufacture of 210d exempted yarn is not contested by SRF. However, they are contesting the duty liability on batch non-virgin poly chips used in the manufacture of 210d yarn. When SRF Polymers Ltd. were in existence due to demerger of the manufacturing facility, the wash water arising during the course of manufacture of poly chips are cleared to SRF Polymers Ltd. who thereafter undertook further process of manufacture of batch poly chips. The process which was integrated as one unit was split up into two units during the existence of M/s SRF Polymers Ltd. who dealt with the process after emergence of wash water. 12. With these factual background, we may examine the various disputes that are subject matter of these appeals. The substantial demand as well as issues were dealt with in the original orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcise valuation. Hence, we note that special packing required for removal of goods safely to the buyer, which is not required for captive consumption itself, cannot determine the marketability of any product. Accordingly, we hold that the batch non-virgin poly chips are excisable products. 13. The next important point for decision is whether the benefit of exemption Notification No.111/1995-CE dated 06/09/1995 as well as the successor notifications are available to such batch non-virgin poly chips. We note that Sl. No.3A of Notification 15/1994-CE as amended by 111/1995-CE states that goods falling under Heading 3901-3914 plastic materials, are fully exempt if re-processed from, or produced out of, the scrap or the waste of goods falling under Chapter 39, 54, 55 or 59. The Original Authority held that the batch non-virgin poly chips cannot be said to have been produced out of scrap or waste. The source of such poly chips is unreacted monomer recovered in the MRP resulting in MRP lactum. As such, he held that the same is nothing but unreacted caprolactam and cannot be considered as a waste or a scrap product. We note that the wordings in the notification are very clear to the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and oligomer contained in wash water. On careful consideration of the findings of the Original Authority and the submissions of the appellant/assessee we note that no distinction can be made in extending the said exemption and batch non-virgin poly chips are eligible for the exemption for the period 06/09/1995 onwards. 14. The Original Authority denied the exemption to poly chips used in the manufacture of fishnet yarn/twine exported out of India, under Notification 47/1994-CE (NT). In this connection, we note that the appellant/assessee strongly contended that the entire quantity of 210d yarn exported was wound on cheese. This is supported by the packing list and invoice. Export yarn was never wound on prin. We also note that the appellant/assessee have submitted detailed records to substantiate their claim regarding export of fishnet yarn/twine. These facts can be cross verified by the Jurisdictional Authorities. It is noted that the appellant/assessee supported his argument by referring to proof of export, invoicewise break-up of export and other documents. It is also noted that SRF Polymers (during the period of their existence) did not manufacture any virgin chips. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... namely SRF Polymers Ltd. The Original Authority in his orders dated 31/03/2005 and 29/07/2005 held that wash water contains 10% of unreacted as well as partially reacted caprolactam and, as such, the same should be considered as a manufactured product. Since, wash water has got significant commercial value and SRF Polymers Ltd. exist only for use of such wash water, the marketability was held to be established. We have noted the manufacturing process of nylon earlier in this order. Wash water emerges as residual by-product when main poly chips emerge after polymerization and washed with hot water. The impugned order itself admitted that wash water is nothing but a process waste . It is apparent that wash water emerges as a technical necessity in the manufacture of nylon polyamide chips. In order to make virgin polyamide chips, it is necessary to wash the main polymerized chips. Admittedly, for manufacture of nylon polymerized chips the required quantity of caprolactam has to be used. It is not the case that for avoiding generation of wash water, lesser quantity of such caprolactam can be used. In other words, the entire quantity of caprolactam used as input in the manufacture of n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appeal is that the show cause notice dated 04/10/1999 issued covering the period of September 1994 to May 1995 was not sustainable due to limitation. We have examined the findings of the Original Authority in this regard. The Original Authority recorded that the Department was aware of the fact that SRF is manufacturing nylon yarn of waste denierage out of nylon polyamide chips and these chips are manufactured out of caprolactam. The Commissioner, however, held that the Department was not aware of use of virgin poly chips, bought out chips and virgin lactum in the manufacture of exempted 210d yarn. We note that the Department is aware of the usage of various inputs in the manufacture of exempted yarn. The appellant/assessee relied upon letter dated 30/10/1991 issued by the Jurisdictional Superintendent of Central Excise as well as show cause notices dated 29/09/1993, 02/03/1994, 09/02/1995 and 26/05/1995 regarding disputed Modvat credit for exempted final product. In this situation, we note that the Department was aware of the manufacture of 210d yarn and various inputs used in such manufacture. The findings of the Original Authority that a particular nature of input used in th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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