Clearance of packing material of inputs & packing material procured by assessee

PJ/Case Laws/2011-12/1375

Clearance of packing material of inputs & packing material procured by assessee - leviable to duty

Case: INDORAMA SYNTHETICS (I) LTD. versus COMMISSIONER OF C. EX., NAGPUR

Citation: 2011 (271) E.L.T. 551 (Tri. - Mumbai)

Issue:- Clearance of packing material of inputs procured as waste - No duty payable.

Clearance of packing material procured by assessee bit becoming waste – duty payable.

Brief Facts:- The appellants are manufacturer of yarn. During the course of manufacture, they used inputs in corrugated boxes/plastic bags. After using the inputs, they have cleared these corrugated boxes/plastic bags (the packing materials of inputs) as scrap without payment of duty. The appellants were also procuring paper tube/bobbins, craft paper, plain paper etc. on payment of duty for proper packing of the yarn for transferring to other division for further processing. During the course of processing, these paper tubes/bobbins etc. were used for proper handling of the goods, which were ultimately became scrap. These scraps have also been cleared by them without payment of duty. They have cleared all the waste generated during the course of their manufacturing activity, without payment of duty.

Revenue was of the view that the appellants was required to pay duty on such waste and scrap. Therefore, two show-cause notices were issued.

In appeal No. E/1010/09, the Adjudicating Authority dropped the demand against which the Revenue filed appeal before the Commissioner (Appeals), who set aside the Adjudication order and confirmed the demand as per show-cause notice.

Aggrieved by the order of the Commissioner (Appeals), appellant is before the Tribunal.

In appeal No. E/106/10, the Adjudicating Authority dropped the demand against which the Revenue filed the appeal before the Commissioner (Appeals), who set aside the adjudication order and confirmed the demand as per show-cause notice. Aggrieved by the order of the Commissioner (Appeals), the assessee is before filed this appeal.

In appeal No. E/106/10, the adjudicating authority confirmed the demand but on appeal by the assessee before the Commissioner (Appeals), the adjudication order was set aside. Therefore, Revenue is in appeal in that matter before this Tribunal.

Appellant’s Contention:- Appellant-assessee submitted that they had cleared the waste which has arisen from the packing material of the inputs procured by them and the same is covered by the Board Circular No. 721 /37/2003-C.X., dated 6-6-2003. Appellant also relied on the decision of the Supreme Court in the case of Commissioner of Central Excise v. West Coast Industrial Gases Ltd. [2003 (155) E.L.T. 11 (S.C.)] and in their own case reported in 2009-TIOL-1913-CESTAT-MUM, Commissioner of Central Excise v. Wipro Ltd. [2002 (150) E.L.T. 249 (T)] which has been affirmed by the Supreme Court in 2003 (154) E.L.T. A175 (S.C.). Appellant also relied on the decision of this Tribunal in their own case vide Order No. A/1534 /WZB/ 2005/C-II, dated 6-6-2005 [2005 (190) E.L.T. 431 (Tri.)].

Respondent’s Contention:- Revenue submitted that in this case, the assessee was also procuring packing materials such as paper tubes/bobbins, corrugated paper/boxes and craft paper on payment of duty and they have sold the scrap arisen of these paper tubes/bobbins, corrugated paper/boxes and craft paper etc. Therefore, the assessee is required to pay Central Excise duty on clearance of waste arising out of these materials procured by the assessee on payment of duty. They placed reliance on Commissioner of Central Excise, Jaipur-If v. Bliilzvara Spinners Ltd. [2005 (182) E.L.T. 371 (Tri.-Del.)].

Reasoning of Judgment:- The Tribunal found that in this case the dispute has arisen on account of clearances of waste of paper, corrugated boxes, plastic bags, paper tubes, craft paper/boxes which have been cleared by the assessee without payment of duty.

It was noted that the appellant has contended that all these waste has arisen on procurement of the raw materials and as per Board's Circular dated 6-6-2003, the assessee is not required to pay the duty on such waste and scrap. The Tribunal also agrees with the contention of the appellant that no duty is payable on waste of packing materials of inputs. But, if any packing material has been purchased by the assessee for packing of intermediate/final goods and the said packing material has become waste, the said scrap has been cleared without payment of duty by them; then assessee is liable to pay duty on such waste.

From the facts of this case, it is not coming out that how much waste has been arisen on account of packing materials of raw materials i.e. inputs and how much packing materials have been procured by the assessee on payment of duty. Therefore, this requires examination at the end of the Adjudicating Authority.

The matter is remanded to the Adjudicating Authority to re-quantify the demand on waste and scrap of packing materials procured by the assessee on payment of duty.

Decision:- Matter remanded back.

Comment: - This is very interesting decision wherein the tribunal has held that the waste of packing material purchased for packing finished goods is chargeable to duty. But no duty is payable on waste of packing material of inputs as per Apex Court decision in West Coast cite supra. But if both the packing material is of same type then the assessee has to maintain the separate inventory for both types of waste. In such a situation, the assessee prefer to pay the duty because the cost of maintaining separate inventory will be more than the actual benefit.

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PJ/Case Laws/2011-12/1375

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