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2019 (8) TMI 719

..... goods ‘cotton waste,’ cleared to the ‘domestic tariff area’ at ‘nil’ rate of duty - HELD THAT:- There could be no doubt that no manufacturer sets out to produce waste which is only incidentally generated in the process of manufacture of finished goods. Appellant is required to take approval of the competent authority for manufacture of identified goods and the scheme itself acknowledges that any waste and rejects arising therefrom would be treated akin to approved finished goods. Therefore, there is no requirement to export such goods for entitlement to the benefit of the exemption notification under Central Excise Act, 1944 and Customs Act, 1962. Clearances from export oriented unit into the domestic tariff area are subject to duties of central excise even though the rate and the value applicable are derived from the provisions of Customs Act, 1962 and the Customs Tariff Act, 1975. There is no dispute that the impugned goods are a waste product and have been subject to the process of assessment as decreed by law. There is also no dispute that the impugned goods have materially altered from the raw materials utilised for manufacture and were not .....

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..... riented unit scheme of the erstwhile EXIM Policy (and the successor Foreign Trade Policy) issued with Letter of Permission (LOP) by the jurisdictional Development Commissioner for the manufacture of cotton yarn. Relying upon EXIM Policy 1997-2000 and the conditions prescribed in notification no. 1/95-CE dated 4th January 1995 and no. 22/03-CE dated 31st March 2003 pertaining to domestic procurement of raw materials and consumables and notification no. 53/97-Cus dated 3rd June 1997 and no. 52/03-Cus dated 31st March 2003 pertaining to imported raw materials and consumables, proceedings were initiated against the appellant for having manufactured and cleared cotton waste, to the domestic tariff area at nil rate of duty in which raw materials and consumables that have been procured domestically and from outside the country without payment of duty were utilized. In all these notifications, the relevant condition is Notwithstanding anything contained in the notification, the exemption contained herein shall also apply to the said goods used for the purposes of production, manufacture, processing or packaging of articles in a user industry and such articles (including rejects, waste, scr .....

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..... duty has to be paid on the articles included rejects waste and scrap material if they are not excisable goods. As per Section 2(d) of the Central Excise Act excisable goods means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff as being subjected to duty of excise and includes salt. Cotton waste is specifically covered by Heading 52.02 and presently the rate of duty mentioned in the First Schedule to the Central Excise Tariff Act is nil. It is, therefore, apparent that cotton waste is an excisable goods as it finds mention in the First Schedule to the Central Excise Tariff Act and is subjected to duty which is presently nil . It has been held by the Supreme Court in the case of Vazir Sultan Tobacco Company Ltd. that excisable goods do not become non-excisable goods merely because of the exemption given under the Notification. As the cotton waste is excisable goods, Second Proviso to Notification No. 1/95-C.E. is not attracted. Accordingly, we reject the Appeal filed by the Revenue. besides which, in Clancey Precision Components Pvt Ltd v. Commissioner of Central Excise & Customs, Pune [2007 (216) ELT 242 (Tri-Mumbai)], the issue itself .....

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..... ufacture and were not the duty free goods removed as such. The only issue that arises is the discharge of duty liability and the dispute is limited to the non-payment of duty arising from non-dutiability. It is clear from the decision of Aarti Industries Ltd that cotton waste , even though subject to nil rate of duty, is considered to be excisable. In Winsome Yarns Ltd v. Commissioner of Central Excise, Chandigarh [2001 (127) ELT 833 (Tri-Del)] the Tribunal was concerned with an identical dispute and it was held that 4. We have considered the submissions of both the sides. The 100% E.O.Us. are provided facilities, among other things, of importing capital goods, raw-material, components etc. without payment of customs duty and also of obtaining similar goods from domestic market without payment of Central Excise duty. These units have also been provided facility to sell a specified quantity of their products in Domestic Tariff Area in India. Section 3 of the Central Excise Act provides that the duty of excise shall be an amount equal to the aggregate of the duties of Customs on like goods produced or, manufactured outside India, if imported into India. It is thus apparent that the n .....

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..... been held to be rejects and waste and they were cleared in the domestic market as per the permission granted by the Development Commissioner. Under these circumstances, no case of diversion or use of the raw materials procured duty free for a purpose other than intended purpose, has been made out. Therefore, no valid grounds have been adduced to interfere with the findings of the Commissioner in so far as non-demand of duty on the raw materials and not taking the consequential penal action. In the decision of the Constitution Bench of the Hon'ble Supreme Court in re Dhiren Chemical Industries, reference arose in view of the conflict between the decisions in Collector v. Usha Martin Industries [1997 (7) SCC 47] and Motiram Tolaram v. Union of India [1999 (6) SCC 375] on the duty liability of inputs that were cleared without duty for use in the manufacture of final product on which duty has been paid but were utilised in manufacture of exported finished goods. In that context, and in accordance with the policy imperative behind such an exemption, the Hon'ble Supreme Court held that 6. An exemption notification that uses the said phrase applies to goods which have been made fr .....

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..... of clearance of domestic tariff area are subject to higher duties than a corresponding domestic unit is. The policy prescription also includes a ceiling on the quantity of goods that may be sold in the domestic market. A unit operating outside the scheme is subject only to the duties of excise on their finished products and there is no limit on the clearance that may be effected from the factory. The scheme of conditions in the exemption notifications under the Central Excise Act, 1944 and Customs Act, 1962 are intended to ensure that a unit operating under the scheme does not derive any unintended advantage vis-à-vis a unit operating outside by utilisation of exempted raw material and consumables. It cannot have been the conception behind the scheme to subject the waste generated by such units to a levy that is not less than that devolving outside the scheme; more so, as the cost of production of the finished goods invariably subsume the value of the materials that are embedded in the waste. Hence such value have already been either included in the obligation for export or subject to rate of duty not less than that suffered by a domestic unit and does not confer any unwarra .....

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