1. The issue involved in this appeal, filed by M/s. India Poly Fibres Ltd., is whether the crimped uncut waste is classifiable under sub-heading 5503.19 of the Schedule to the Central Excise Tariff Act as waste as claimed by them or under sub-heading 5501.20 of the Tariff as polyster tow or staple fibre.
2.1 Shri V. Lakshmikumaran, learned Advocate, submitted that the Appellants manufacture Polyster Staple Fibres (PSF); that during the manufacture of PSF, waste arises at various stages; that crimped uncut waste arises during the process of drawing and crimping of undrawn polyster filament obtained after spinning and Polymerisation; that while the filaments pass through the crimping machine, the required uniform pressure is applied to the crimper gate which takes up to 20 seconds to develop and, therefore, the front portion of the Tow which emerges out of the crimper is usually not properly crimped; that such tow would normally have one or more of the following defects, namely, uneven crimps, fused portion, flat tow, cut edge, etc.; that this initial length of the tow which is cut by the operator manually is termed as 'crimped uncut waste'; that it is further cut into small pieces of about 1 to 11/2 metres length each for easy packing and to avoid further entanglement.
2.2 He, further, mentioned that this waste was classified by them in their classification list under sub-heading 5503.19 of the Tariff; that the sample of crimped uncut waste was drawn on 14-1-1987; that the Chemical Examiner submitted his Report on 20-3-1987 and their classification list was finally approved on 5-5-1987; that another sample was drawn on 6-5-1987 of which Report was given by the Chemical Examiner on 17-6-1987.
2.3 He mentioned that a show cause notice dated 21-7-1987 was issued to them alleging that PSF was cleared by them as waste and duty was demanded on all types of waste-undrawn waste, crimped uncut waste and cut and processed waste; that another show cause notice dated 3-1-1989 was issued alleging that crimped uncut waste cleared from the factory between 5-5-1987 and 24-7-1988 was not waste but PSF relying upon the test memo dated 25-7-1988; that their request for retest was denied; that they also requested for cross examining the Chemical Examiner; that at the time of personal hearing on 24-6-1990, they produced an expert opinion tendered by Dr. V.B. Gupta, Professor, IIT, Delhi; that the Superintendent, under his letter dated 22-9-1990, informed them the test result on crimped uncut waste; that the Superintendent under his letter dated 22-10-1990 informed them that samples had been sent for retest and also communicated the questions raised by the Deputy Chief Chemist for reply; that the Collector visited their factory premises on 18-11-1990 and studied the complete processes; that the Collector, under Order-in-Original No. 24/88 dated 2-1-1991 demanded duty on crimped uncut waste while dropping the demand of duty on undrawn waste and cut and processed waste.
2.4 He mentioned that on appeal, the Tribunal, vide Final Order No.E/33 & 34/94-D, dated 21-1-1994, remand the matter directing the Department to consider the re-test on the samples, to take into consideration the Board's Circular No. 20, dated 15-12-1989 and to take into consideration the opinion tendered by the Professor, IIT Delhi.
The Tribunal further directed the Collector to furnish the results of the test/re-test reports.
3.1 The Commissioner (earlier Collector) under de novo proceeding passed Order-in-original No. 14/2000, dated 31-3-2000 and reconfirmed the demand. On appeal preferred by the Appellants, the Tribunal, vide Final Order No. 404/2000-D, dated 14-12-2000 [2001 (138) E.L.T. 1324 (Tri.)], again remanded the matter to the Commissioner "for fresh decision in accordance with the directions given by the Tribunal in the earlier remand Order dated 21-1-1994......." 3.2 The learned Counsel submitted that the Commissioner has passed the impugned Order dated 19-2-2002 confirming duty demand on the same grounds as decided by the earlier Adjudicating Authorities without complying with the remand directions of the Tribunal; that in the impugned Order, the Commissioner has given a finding that the request for re-test had been "turned down by the Competent Authority and this was communicated to the party vide Supdt. Barabanki's letter C. No.20-Poly fibre/CLPC/BBK/87/797-98, dated 21-12-1989"; that this itself shows that the impugned Order has not been passed in compliance to the directions given by the Tribunal; that moreover after the letter dated 21-12-1989, the Superintendent in letter dated 22-10-1990 specifically indicated that "Pursuant to your request made in your defence reply to the adjudicating authority the following samples have been sent by this office to the Chemical Examiner..... In this context, the Dy. Chief Chemist, Central Revenue Control Laboratories, New Delhi has made the following queries...."; that as per direction, they furnished answer to the queries under their letter dated 5-11-1990 and deposited the fees for retest; that they had also requested for another retest under their letter dated 5-12-1990 along with evidence for deposit of fees. The learned Advocate emphasized that all these facts were before the Tribunal and were specifically indicated in final Order dated 21-1-1994 and thus the impugned Order has been passed in defiance of the remand direction of the Tribunal and is liable to be set aside.
4. He also stated that Board's Circular dated 15-12-1989 clarifies that "drawing is essential before or during the filaments are crimped/texturised and then cut into staple fibres. During these processes waste may arise which are also covered under Central Excise Tariff Heading No. 55.03. Any fibre damaged during crimping/texturising or drawing could be a waste. These can be identified either by visual observation or by drawing samples and testing." The learned advocate mentioned that the Commissioner has brushed aside the binding Circular by relying on the decision in the case of CCE, Bombay v. Kiran Spinning, 1988 (34) E.L.T. 5 (S.C.) and holding that guidelines are not applicable to the present case since waste was generated manually cutting the long tow into smaller strands with an intent to evade payment of duty; that this finding of the Commissioner is incorrect and against the binding circular of the Board and the remand directions of the Tribunal. He relied upon the decision in the case of Dhiren Chemicals, 2002 (139) E.L.T. 3 (S.C.) wherein it has been held by the Supreme Court that "regardless of the interpretation that we have placed on the phrase, if there are circulars which have been issued by the Central Board of Excise & Customs which place a different interpretation upon the said Phrase, that interpretation will be binding upon the Revenue. He, further, mentioned that the Commissioner has also not considered IIT Report and has brushed aside it on the ground that the sample sent for the said test was drawn without the presence of the Departmental authorities; that the Professor of IIT has clearly mentioned in his Report that the lengths of a number of filaments bundles were found to be in the range of 82 to 93 cm, the crimps varied from 16 to 34 and the fused portions, counted in some representative samples, was found to be large; that the Professor Shri V.B. Gupta has thus concluded that these drawn crimped filament bundles did not have the characteristics and properties required of polyster staple fibre. The learned Advocate contended that the reasoning of the Commissioner to deny the report of a reputed organization is unsustainable and liable to be set aside.
5.1 Coming to the aspect of classification, the learned Advocate, mentioned that the Commissioner has classified the product under sub-heading 5501.20 on the ground that crimping is not essential for the manufacture of the final product; that he has relied upon HSN Explanatory Notes in support of his finding. He contended that the Commissioner has, however, omitted to place reliance on the technical material relied upon by the Appellants which clearly shows that drawing and crimping are essential processes in the manufacture of the polysler staple fibre; that the world over the process of manufacture of polyster staple fibre is as undertaken by the Appellants and the generation of waste is inevitable; that without undertaking the process of crimping after drawing, the final product cannot be manufactured and it is during this process, the disputed waste has arisen, due to improper crimping; that such improperly crimped waste cannot be used as fibre or tow in the manufacture of final product. He relied upon the decision in the case of Swadeshi Polytex Ltd. v. CCE, Meerut, 1999 (109) E.L.T. 998 (T) wherein also the allegation was that the assessee had removed man-made fibres in the garb of waste clandestinely and the Tribunal observed that "The emergence of waste is a known phenomenon during the manufacture of synthetic filament and tow. The learned Commissioner, in his discussions observing that there is no definition of waste in the Tariff, held that waste was merely sub-standard fibre and, therefore, "it would remain fibre as such though of sub-standard quality." The Tribunal did not agree with these findings and has held "We find that there was no warrant for such a ruling. The explanation to the relevant tariff entry......would show that waste under the tariff item had a specific connotation understood by the manufacturers as well as by the officers." Reliance has also been placed on the following decisions :-Reliance Industries Ltd. v. CCE, Mumbai, 2003 (159) E.L.T. 164 (T) = 2003 (106) ECR 472 (T)Indian Petrochemicals Corporation Ltd. v. CCE, 1998 (103) E.L.T. 665 (T) 5.2 Finally the learned Advocate submitted that no doubt the impugned waste is used to get yarn; that, however, by removing the unwanted portion, quality of the yarn so obtained is also low; that the variation in prices of waste and polyster staple fibre is around Rs. 20 - Rs. 28 and the appellants would not incur any loss by selling the prime product as waste; that there has been no evidence led by the Department to show flow back of any additional consideration for the differential value; that this also shows that the classification of the waste under sub-heading 5502.10 is only based on assumptions and presumptions; that under similar facts and circumstances, the Tribunal in Reliance Industries case, supra, has held that when there is no evidence by the Department regarding the flow back of the additional consideration, the allegation of the department is unsustainable; that when the classification list has been approved after drawl of sample and their factory has been working under the physical control so far as PSF and its waste are concerned, the questions of imposing penalty and invoking extended period of limitation do not arise at all.
6. Countering the arguments, Shri A.S. Bedi, learned SDR, reiterated the findings of the Commissioner as contained in the impugned Order and submitted that the impugned Order has been passed after complying with the Remand directions. Finally he mentioned that if the re-test of the samples is considered to be significant, the Revenue has to ascertain as to whether samples of the impugned products are available. He, therefore, requests for adjournment of the matter. In reply the learned advocate mentioned that no purpose would be served by remanding the matter once again as the same had been remanded twice by the Tribunal and the Revenue did not get the samples re-tested.
7. We have considered the submissions of both the sides. The Collector, in first Adjudication Order No. 1/91, dated 2-1-1991, after referring to Notes to Chapter 55 of the Central Excise Tariff, Explanatory Notes of H.S.N., report of the Chemical Examiner and other material came to the conclusion that the product removed as crimped and uncut waste was to be classified under sub-heading 5501.20 as Polyster Tow or staple fibre depending upon their length. The Appellate Tribunal, however, after hearing both the sides ordered, vide Final Order No. E/33 & 34/94-D, dated 21-1-1994, as under : "On a careful consideration of the submissions made, it is seen that the question of demand of duty on the goods will have to be remanded for the reasons argued before us by the learned Counsel as it appears from the record that the appellants had contested the report of the Chemical Examiner as per Rules and had given the grounds therefore. The Department had also apparently taken steps in this direction but whether there had been any retest of the samples or not is not on record which is relevant material to conclude this dispute and to which the appellants should have access. There is also a Board's clarification referred to and relied upon by the appellants which has to be considered by the Collector. Nor has there been any observation regarding the opinion obtained by the appellants from IIT. In the result the impugned orders of the Collector and the Additional Collector are set aside and the cases are remanded for adjudication afresh by the Collector on the issue of liability to duty of the goods which the appellant call crimped uncut waste which the Department thinks is Polyster staple. The Collector, may in the de novo proceedings furnish result of test/retest......" 8.1 The Commissioner passed the Adjudication Order No. 14/2000, dated 31-3-2000, in de novo proceedings after six years of remand by the Tribunal, again confirming the classification of the impugned goods under sub-heading 5501.20 and demand of duty, etc. observing that the request for retest had been turned down which had been communicated to the Appellant by the Superintendent under letter dated 21-12-1989 against which no appeal was preferred by them and as such right of re-test had been forfeited and the reports of the test done at CRCL attained finality. Regarding IIT Test Report, the Commissioner observed that "the report may not be considered while adjudicating the matter, because samples were neither drawn in the presence of the departmental officers nor the contents and nature of the samples were known to the department." The Adjudicating Authority also gave his findings that "The Tariff or HSN does not provide any information that crimping is a necessary parameter for strands of filaments to be called a tow or staple fibre. If it would have been so necessary, the HSN must have a clear reference to it." 8.2 In appeal filed by the Appellant, the Appellants had stated that the said Order was liable to be set aside on the simple ground that Commissioner "had failed to comply with the directions given by the Tribunal vide Order dated 21-1-1994 while remanding the matter for fresh decision." The Tribunal observed that the learned SDR has not been able to refute the contention of the Counsel and "the perusal of the impugned Order shows that the Commissioner had failed to comply with these directions of the Tribunal and only reproduced the earlier order. Therefore, the impugned Order passed by him cannot be sustained and deserves to be set aside." The Tribunal, therefore, second time set aside the Order and remanded the matter "to the adjudicating authority for fresh decision in accordance with the directions given by the Tribunal in the earlier remand Order dated 21-1-1994." 9. Unfortunately, the Commissioner again while passing the impugned Order in second de novo proceedings has not complied with the directions of the Tribunal given in Final Order dated 21-1-1994 and reiterated in Final Order dated 14-12-2000. The Commissioner in the present impugned Order also more or less repeated the findings as contained in the earlier two Adjudication Orders which stand set aside and remanded with specific directions. As the Revenue had not preferred any appeal against the earlier Orders passed by the Tribunal, the same have attained finality and the Commissioner is required to adjudicate the matter in de novo proceedings after complying with the directions of remand. The Commissioner has once again refused to follow the remand directions advancing the same reasons adopted by his predecessor in Adjudication Order dated 31-3-2000 that is (i) the request for retest was turned down and, (ii) IIT Test report is not acceptable because samples were not drawn in the presence of the departmental officers nor the contents and nature of the samples were known to the department. It is thus apparent that the Adjudicating Authority does not want to comply with the Remand directions. In view of this we do not find any reason to adjourn the matter as requested by the learned SDR to ascertain as to whether samples are available. The Adjudicating Authority has completely disregarded the Superintendent's letter dated 22-10-1990 in which the Appellants were informed by the Range Superintendent that "pursuant to your request made in your defence reply to the adjudicating authority, the following samples have been sent by this office to the Chemical Examiner........... In this context the Dy. Chief Chemist..... has made the following queries." The Appellants had submitted the replies to those queries under their letter dated 5-1-1990 and also intimated that they were depositing Rs. 750/- being retesting fees. It is why the Tribunal, in its First Final Order dated 21-1-1994 observed that "The Department had also apparently taken steps in this direction but whether there had been any retest of the samples or not is not on record which is relevant material to conclude, the dispute and to which the appellants should have access." 10. We also do not find any substance in the finding of the Commissioner that crimping is not essential for the manufacture of the final product. It is not the case of the Revenue that the Appellants are not undertaking the process of crimping. If they undertake the said process of crimping, it is inevitable that some waste may emerge during the process. The Tribunal in the case of Swadeshi Polytex has clearly held that "The emergence of waste is a known phenomenon during the manufacture of synthetic filament and tow." The Tribunal again in Reliance Industries Ltd. v. CCE, Mumbai, 2003 (159) E.L.T. 164 (T) = 2003 (106) ECR 472 (T) has held that "To treat the figures of clearance of waste as of fibre would mean that no waste at all emerges. This is technically impossible. Therefore, we cannot come to the conclusion that no waste could have arisen in the manufacture of staple fibre." The Revenue, thus, cannot claim that no waste would emerge. The Appellants have referred to Vol. 16 of Encyclopedia of Chemical Technology by Kirk Othmer wherein it is mentioned that "Synthetic staple fibres virtually always are crimped deliberately during manufacture by a mechanical stuffing or gear crimping process.... The crimp enhances inter fibre friction which is necessary for the web so that it can sustain itself during the manufacturing process." The Board also vide Circular F. No. 55/11/89-CX. 1, dated 15-12-1989 considered the classification of Waste under Heading 55.03 of the Tariff and after referring to Notes to Chapter 55 and HSN Explanatory Notes, clarified that if fibres are not of uniform length it could be treated as waste of staple fibre and tow falling under Heading 55.03. It has also been mentioned in the said Circular that "drawing is essential before or during the filaments are crimped/texturised and then cut into staple fibres. During these processes waste may arise which are also covered under Central Excise Tariff Heading 55.03, Any fibre damaged during crimping/texturising or drawing could be a waste." (Emphasis supplied).
The Commissioner has also not considered the said Circular though mentioned in the Remand Order of the Tribunal. Similarly the Commissioner has brushed aside the Report tendered by Shri V.B. Gupta, Professor IIT merely on the ground that the sample was not drawn in the presence of the Departmental Officer. The said Report clearly mentions that "drawn, crimped filament bundles with lengths in the range of 82 to 92 cm have uneven crimps and a large number of fused portions. Thus this sample does not have the characteristics and properties required of polyster staple fibre." Once the Tribunal has directed the Commissioner to consider the said Report, the same can not be simply brushed aside, particularly when the same reason for not considering it has been given by the Commissioner in second Adjudication Order dated 31-3-2000 which has also been set aside by the Tribunal and remanded vide Final Order No. 404/2002-D dated 14-12-2000.
11. The Chemical Examiner's test report merely mentions that the sample has the characteristic of tow as mentioned in Note 1 to Chapter 55 of the Tariff. There is force in the contention of the Appellants that when the tow emerges out of the crimper and is removed as waste on account of the tow having various defects like no crimps, uneven crimps or micro crimps, etc. the same is undoubtedly tow as its running length is more than 2 meters. The Chemical Examiner has not given any finding on the aspect as to whether the sample contained some defects so as to treat as waste. The Tribunal in the case of Swadeshi Polytex has also held that the mere fact that some of the waste could be disentangled and used in the place of fibres, was acknowledged vide Notification No.43/80-C.E., dated 24-4-1980 which exempted waste used in the manufacture of man-made fibres. Polyster fibre which is manufactured from waste by recycling was ex-empted from duty vide Notification No.16/82, dated 14-2-1982. Therefore, the belief of the Commissioner that the waste was actually yarn of sub-standard quality had no basis. Even if the waste was capable of being used for spinning, it did not cease to qualify for the term "waste". Further, we observe that the Tribunal has also considered the more or less similar test Reports given by the Chemical Examiner in the case of Swadeshi Polytex and found that "no conclusion can be drawn as to the identity of the goods, namely standard fibre v. waste." Accordingly the appeal succeeds. We set aside the impugned Order and allow the appeal with consequential relief, if any.