indo Rama Synthetics (India) Ltd. Vs. Commissioner of C. Ex. - Court Judgment

Excerpt:
1. this is an appeal against an order dated 12-12-2003 passed by the commissioner of central excise & customs, nagpur, filed by the appellants.2. the appellants are engaged in the manufacture of polyester chips, polyester staple fibres, polyester filament yarns and spun (blended) yarns falling under chapters 39, 54 and 55 of the central excise [tariff] act, 1985.3. the appellants are aggrieved by an order dated 12-12-2003 passed by the commissioner demanding a duty amount of rs. 1,21,32,329/- on following accounts:-------------------------------------------------------------------------rs. 17,95,160/- against clearance of furnace oil/mineral oil sludge.------------------------------------------------------------------------rs. 87,73,169/- against clearance of waste and scrap arising.....

Judgment:
1. This is an appeal against an Order dated 12-12-2003 passed by the Commissioner of Central Excise & Customs, Nagpur, filed by the appellants.

2. The appellants are engaged in the manufacture of Polyester Chips, Polyester Staple Fibres, Polyester Filament Yarns and Spun (Blended) Yarns falling under Chapters 39, 54 and 55 of the Central Excise [Tariff] Act, 1985.

3. The appellants are aggrieved by an Order dated 12-12-2003 passed by the Commissioner demanding a duty amount of Rs. 1,21,32,329/- on following accounts:-------------------------------------------------------------------------Rs. 17,95,160/- Against clearance of furnace oil/mineral oil sludge.------------------------------------------------------------------------Rs. 87,73,169/- Against clearance of waste and scrap arising from the inputs and packing materials of finished goods.------------------------------------------------------------------------Rs. 15,64,000/- Against clearance of waste and scrap arising from the capital goods.

and penalty of Rs. 82,68,059/- under Section 11AC of the said Act and Rs. 10,00,000/- under Rule 173Q of the said Rules, read with Rule 25 of the Central Excise Rules, 2002 was imposed along with interest under Section 11AB of the said Act.

4. (a) The issue involved in this appeal is that whether the Mineral Oil Sludge is excisable? The Ministry of Finance (Department of Revenue), New Delhi, vide its Circular F.No. 84/2/86-CX. 3, dated 23-3-1987 clarified this issue in para 3 of the said Circular as follows :- "It is accordingly clarified that the mineral oil sludge, which accumulates at the bottom of tanks for the storage of petroleum products, would fall outside the scope of the Schedule to the Central Excise Tariff Act, 1985 being not a manufactured product.

Pending assessment may be finalized on the above basis".

4. (b) The waste/scrap arriving from packing material generally when cleared will not call for reversal of credit is now well settled. The appellants claim is to be considered. If the Department has material as regards some G.I. wire scrap also cleared, which arose from G.I. wire as input, the Department has to bring evidence to that effect and can recover the duty at such rate as provided for such G.I. wire in the Tariff.

4. (c) The waste/scrap of capital goods has to be cleared on payment of appropriate duty as per classification of such waste/scrap in the Tariff on depreciated value.

5. Therefore, apparently, demand of duty should be confirmed, after ascertaining the correct classification under the Tariff Act as applicable. Accordingly, appeal allowed in remand in the above terms and to determine the correct classification, if applicable, other than sludge and producing material as covered by Board's orders and Supreme Court's decision on the subject. Penalty to be determined thereafter.