TMI Blog2000 (7) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... y for the manufacture of the final products or for manufacture of intermediate products necessary for the manufacture of final products and return the same to his factory. (This shall be done only after debiting an amount equal to ten per cent of the value of such inputs or, as the case may be, the partially inputs declared by him on the challan under which such inputs or partially processed inputs are cleared from his factory). Rule 57F(18) [old Rule 57F(4)] provided that any waste, arising from the processing of inputs, in respect of which credit has been taken may be - (i) removed on payment of duty as if such waste is manufactured in the factory; or (ii) destroyed in the presence of the proper officer on the application by the manufacturer and if found unfit for further use, or not worth the duty payable thereon, the duty payable thereon being remitted. The first clarification on this issue was given by the Board way back in the year 1988 vide its Telex F. No. 261/76/88-CX. 8, dated 4-10-1988 addressed to all Collectors in relation to erstwhile Rule 57F(2). The question was raised before the Board whether Turnings and Borings arising during the processs of manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n returned, there was no purpose in recovering the duty and again giving it as credit. The demand for duty could be confirmed only if there was a diversion of generated scrap for any other purpose. This views were held by the CEGAT (WRB) in the case of Chloride Industries Ltd. - 1993 (63) E.L.T. 633 order dated 2-9-1992 and Press N. Forge - 1994 (74) E.L.T. 894 order dated 15-4-1994. B.endorsing removals under Rule 57F(4) only on payment of duty. It was held that Aluminium scrap sent to job worker is not a case covered by Rule 57F(2) but by Rule 57F(4)(a). (India Piston Ltd. - 1994 (51) ECR 353 SRB - Order dated 10-1-1994). Relying on Nucon and Indian Pistons, it was held that clearance of such scrap would be covered by Rule 57F(4) and would not come within the mischief of Rule 57F(2) as admittedly what was cleared from the appellant's factory was not duty paid inputs but waste generated during the processing of inputs in the course of manufacture of end product. (Madras Electrical Conductors (P) Ltd. - 1995 (61) ECR 641 SRB order dated 4-7-1995). The Bench observations in this case are worth noting. The Bench held that these provisions of the rules are to be interpreted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seems the earlier decision in the case of Indian Steel was not brought to the notice of the Hon'ble Member in this case). Latest decision in the case of Maharaja Engg. - 1999 (35) RLT 800 B-1 order dated 30-7-1999 held that benefit of Notification No. 214/86-C.E. is not available as it covers only inputs of semi-finished goods received as such and sent to job worker. In the cases listed before us the case in Appeal No.(m) E/733/93-Bom. M/s. Wyeth Laboratories Ltd. v. C.C.E. the issue involved is "reconditioning" (reprocessing of catalyst) being got conducted under the provisions of Rule 57F(2) while in the other cases the issue is not involving catalyst but involves the issue of inputs processed which cannot be further processed into the desired final end product. 2.The matter was heard, when ld. Counsel Shri J.R. Cama in Appeal No. E/732/93, Shri V. Lakshmikuraman, ld. Counsel in Appeal No. E/135/94-Mad., E/113/94-Mad., E/278/95-B and Shri Dilip Vasudevan, ld. Counsel in the case of E/171/95-CAL appeared and Shri Sanjeev Srivastava, ld. D.R. appeared for the Revenue. 3.After considering the submissions made by both sides and the materials on records it is found :- Rule 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to obtain maximum targeted production of the final product by utilising the facilities available in his premises or by sending them out on job work to other places. Only when final product is no longer profitable or technologically possible, a manufacturer would treat such resultant stage of by-product, refuse, scrap to be no longer useful and therefore a waste. In this view the word "waste" used in rule 57F(4) has to be understood to denote a form of inputs, after partial, full or reprocessing which could not in a technological/commercially feasible manner be converted to a final product or desired to be converted further. Thus what would be 'waste' for a manufacturer, may not be a 'waste' in the case of another manufacturer, even in the case of same kind of goods. It is significant to note, that while Rule 57D talks of three stages i.e. waste, Refuse or by- product, Rule 57F(4) only talks of waste. Therefore, it appears, that the framers of the rules have used the word 'waste' in Rule 57F(4) to be understood in a limited fashion; this has to be restricted to such converted inputs which are not desired to be used any further, for use, in or in relation to the manufacture of the fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at any stage on the assessees efforts/desire to use the inputs in or in relation to the manufacture of the final products. Therefore, Rule 57F(4) cannot be read to be applicable to partially processed inputs or inputs required to be sent for repairs, refining, reconditioning or carrying out any other operation necessary as the case may be, for the manufacture of the final product, as long as procedure of Rule 57F(2) is followed. 4.We, therefore, find the interpretation placed by the West Regional Bench in the Chloride Industries - 1993 (63) E.L.T. 633 case to be the correct interpretation of Rules 57F(2) F(4) and do not find any reason to uphold the contrary view of S.R.B. The Reference is answered as follows : "It is for the assessee to opt for provision of Rule 57F(2) and comply with the same and the Rules do not bar the route available to him of Rule 57 (2) as long as he complies with the procedure provided therein. Only when the assessee does not want to opt for the same, he would be covered by the provisions of Rule 57F(4) for the inputs which may be remaining with him at any stage of processing/conversion." Sd./- (Sidharath S. Sekhon) Member (T) Sd./- (G.A. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther appropriate headings of the tariff." 10.Thus, we find that for determination whether particular product is waste the various tests set out above are necessary for its classification as waste under heading 72.04. Heading 72.04 according to the classification given by the Board covers metallic waste meant for melting, if it is not used for re-melting purpose but is converted into something else without the process of re-melting then it cannot be waste classifiable under chapter heading 72.04. 11.We also find that Note 6(a) of Section XV of HSN also speaks that only that part is waste and scrap which is not usable as such. Notes on pages 987-988 of HSN further support the view that waste and scrap of metal is generally used for the recovery of metals by re-melting or for the manufacture of chemicals. 12.Analysing the above contentions in the context of what is waste and scrap we come to the inevitable conclusion that waste and scrap of metal is that part which is not usable as such but is used for re-melting or for the manufacture of chemicals. We further note that the waste and scrap cannot be used as such if it is used as such then it is not waste classifiable under chapt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the product is known and traded by those who have specific knowledge. Waste is common term and is known well by the people who deal in it and thus I am not in agreement with my learned brother that the waste generated can be treated as partially processed input because the input in the instant case is ingot and further working of the ingot is partially processed ingot. Thus, the waste generated in the process is neither the inputs nor the partially processed input and hence not covered by the provisions of Rule 57F(2). 16.Now let me examine Rule 57F(4). Rule 57F(4) provides any waste arising from the processing of inputs, in respect of which credit has been taken may be removed on payment of duty as if such waste is manufactured in the factory. Now examining the words used in the sub-rule, we have to examine whether waste arises in the process or processing of ingots in respect of which Modvat credit has been taken. In the instant case the input is ingot. Modvat credit has been taken of duty paid on ingots. Waste arises in the process of working on the ingots and thus requirement of sub-rule (4) is fully met. I, therefore hold that removal of waste which is admittedly the melti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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