Full Judgment
2. M/s. Standard Industries Limited is engaged in the manufacture of cotton yarn, man-made fabrics, embroidered fabrics, etc., while M/s.
Khatau Makanji Spinning and Weaving Company Limited is the manufacturer of polyester staple fibre yarn of different blends. Both the respondents have opted for modvat facility for inputs to be used in the manufacture of their final products. During the manufacture thereof soft waste was generated and the same was cleared at nil rate of duty.
Show cause notices were issued for recovery of wrongly availed modvat credit which notices were adjudicated by the jurisdictional Assistant Commissioner, who confirmed the demand raised on waste in the show cause notices and also imposed penalty of Rs. 1,000/- on M/s. Standard Industries Limited. No penalty was imposed upon M/s. Khatau Makanji Spinning and Weaving Company Limited. The assessees preferred appeals before the Commissioner (Appeals), who set aside the order-in-original relying upon his earlier order in the case of M/s. Victoria Mills wherein he had held as under: "The short point for consideration is whether or not the waste that come into existence in the process of manufacture of blended yarn from the fibres would amount to manufacture. Chapter Heading 55.01 deals with synthetic staple fibre and two, including tops thereof whereas waste (including noils, waste yarn and garnetted stock) of man made fibres are classifiable under heading 55.03. Both hard waste and soft wastes are covered under the said heading. For purpose of classification of the waste under this heading Chapter Note 3 clarifies that sub-heading Nos. 5503.11, 5503.12, 5503.19 and 5503.20 apply only to waste arising in or in relation to the manufacture of man made staple fibre. As regards the hard waste in relation to waste yarn in artificial staple fibre Note 4 to the Chapter clarifies that sub-heading 5503.39 applies only to such waste yarn as may arise prior to the removal, for weaving, of yarn of artificial staple fibres. The classification of the waste is therefore, governed by this chapter note only. In the absence of specific provision that Chapter Heading 55.01 includes waste of synthetic staple fibres and tow including tops thereof, the waste are covered only under heading 55.03. The appellants are not manufacturing staple fibres and read with Note 3 to the Chapter since the waste of blended yarn arises prior to the manufacture, heading 55.03 is not attracted. Since Chapter Heading 55.01 does not cover waste, the classification of the waste that arise prior to or in the manufacture of blended yarn from the polyester/viscose fibres, by the Assistant Commissioner under Chapter 55.01 is note correct. Since in terms of note to Chapter 55 does not cover the waste that emerges prior to or in the manufacture of blended yarn such waste is note liable to duty. Accordingly the question of reversal of modvat credit would not arise." 4. I note that the Revenue's appeal against the decision in the case of Victoria Mills Limited has dismissed by the Tribunal vide its order No.C-II/2360/WZB/2001 dated 11/09/2001 relying upon the Tribunal's order in the case of Bhor Industries v. CCE 1991 (56) ELT 611. The Bhor Industries decision is in the context of disposal of waste of polyethylene and this has been followed in the case relied upon by the Commissioner (Appeals) in the present impugned order. Therefore the ratio of this judgment is directly applicable, although learned SDR seeks to place reliance upon the Tribunal's order in the case of DCW Ltd. v. CCE, Madurai 1996 (81) ELT 381 which is on dutiability of spent sulphuric acid. Following the ratio of the Victoria Mills decision, which is applicable on all to the present case, I uphold the impugned orders and reject the appeals.