Full Judgment
2. The facts of the case, in brief, are that the respondent herein is manufacturing wires and cables and other insulated electric cable, conductors and tele communication cables. A show cause notice was issued to the respondent asking them to explain as to why duty should not be collected from them inasmuch as in the process of manufacture of the product waste and scrap of plastic is generated out of the raw materials used for the manufacture of the final product. It was alleged that as the respondents were clearing these materials at nil rate of duty under Notification No. 53/88, dated 1-3-1988, and since Modvat credit was taken on such raw material they became non-duty paid in character. The Assistant Collector dropped the demand on the ground that the Notification No. 53/88 was silent as to whether the benefit to clear PVC scrap at nil rate of duty is admissible even when the party had taken Modvat credit of duty paid on PVC granules out of which the scrap is generated as byproduct in the manufacture of wires and cables.
Referring to the clarification given by the Central Board of Excise and Customs, the Assistant Collector held that such goods (raw materials) cannot be termed as non-duty paid. He also relied on the provisions of Rule 57D that credit of specified duty allowed in respect of any input shall not be denied or varied on the ground that part of the input is contained in any waste, refuse of by-product arising in the course of manufacture of the final product. This order of the Assistant Collector was reviewed by the Collector, and an appeal was filed before the Collector of Central Excise (Appeals) who held as indicated above.
3. Arguing the appeal, Shri M.P. Singh, learned JDR submits that the learned Collector (Appeals) has incorrectly dismissed the appeal of the Department both on merits as well as under Section 35E(4). He submits that such waste and scrap had not arisen from PVC granules but had arisen from the manufacture of electric wires and cables; Sl. No. 24 of Notification 53/88, dated 1-3-1988 grants exemption in respect of waste, parrings and scrap arising from the goods falling under Chapter 39. He submits that in the instant case, the waste did not arise from goods falling under Chapter 39 but arose from goods falling under Chapter 85. He submits that thus the order of the lower authorities was incorrect. He also submitted that the learned Collector (Appeals) held on the one hand that the Assistant Collector has correctly held that duty is wiped out if credit is taken on the raw materials.
3. Shri Ascharaj Lal, learned Consultant appears for the respondents and submits that the lower authorities have correctly held and prays that the appeal may be rejected.
4. We have heard the detailed submissions of the learned DR and perused the records. We note that the show cause notice was limited to PVC waste arising out of the use of PVC granules, whereas in the Review Order and the appeal filed before us, the issue for determination is whether the waste arises out of the raw materials used in the manufacture of wires and cables. We note that the PVC falls under Chapter 39 whereas electric wires and cables fall under Chapter 85.
Thus, we find that the appeal is on an entirely different ground which was not the subject matter of the show cause notice. In effect, the Department has tried to make out a completely new case which was not the issue in the show cause notice. In this view of the matter, we reject the appeal of the Revenue.