Exigibiliy of sale of waste sugar & waste paper cutting

PJ/Case Laws/2011-12/1333

Case: PARLE BISCUITS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, DELHI-III

Citation: 2003 (155) E.L.T. 527 (Tri. - Del.)

Issue:- Sale of waste sugar and waste paper cutting – whether exigible to excise duty?

Saleof used cylinders as waste and scrap – leviability of duty.

Brief Facts:- Appellants were manufacturing Biscuits, flavour mix and printed laminated waxed paper and were availing MODVAT credit of duty paid on inputs and capital goods. Department demanded duty from appellant on waste sugar and waste paper cutting.

The Adjudicating Authority classified the waste sugar under Heading 1701.90 of the Schedule to the Central Excise Tariff Act and demanded duty with interest.

Appellant is before the Tribunal.

Appellant’s Contention:- Appellant contended that both these goods are not liable to duty as they are neither specified in Central Excise Tariff nor are manufactured product and have arisen during the course of manufacture of final products. Both these goods are non-excisable and not liable to duty.

Appellant contended that Department had incorrectly classified the waste sugar under Heading 1701.90 as it is not sugar. That if at all it will be classifiable under Heading 23.01 of the Tariff and will carry nil rate of duty. That it is not marketable as only they are selling the same to one person.

Appellant relied upon decision in case of Commissioner of Central Excise Hyderabad v. Nizam Sugar Factory [2000 (123) E.L.T. 210 (A.P.)] wherein it has been held that dirty sugar is not marketable and the Act does not provide for levying any duty on dirty sugar.

Appellant, further, submitted that they purchased paper falling under Heading 48.05 and they got waste paper which is not excisable; That the Department has wrongly classified it under sub-heading 4702.90. Appellant also mentioned that they had sent gravura printing cylinders which became useless after repeated use to the supplier company on returnable challans for replacing them against the new cylinder; that they have not followed the correct procedure.

Further, appellant submitted that out of the total duty of Rs. 2,28,834/- they have already deposited Rs. 1,89,803/- that some of the amount had been deposited even before the issue of show cause notice; that penalty under Section 11AC of the Central Excise Act is not imposable as part of the period is prior to the insertion of the said section in the Central Excise Act; that further, penalty under Section 11AC and Rule 9(1) of the Central Excise Rules cannot be imposed simultaneously. Finally, appellant submitted that the quantum of the penalty is on very high side.

Reasoning of Judgment:- The Tribunal found that appellants were availing Modvat credit of the duty paid on sugar, paper and various chemicals, etc., under Rule 57A and were manufacturing Biscuits and printed laminated wax paper. During the process of manufacture, waste sugar and waste paper are generated which was being sold by the Appellants. The sale of these waste products has not been denied by the Appellants. Once they are selling these products, it cannot be claimed by them that the said products are not marketable.

Once the waste products obtained during the process of manufacture are being sold, the appropriate duty of excise would be payable by the Appellants under Rule 57F of the Central Excise Rules, 1944. Heading 1701 of the Tariff applies to Cane or beat sugar or chemical sucrose in solid form. The waste sugar is appropriately classifiable under Heading 1701.90 and is not classifiable under Heading 2301 as sugar is covered by Chapter 17 only and Chapter 23 of the Tariff applies to residues and waste from the food industries including baggage, other waste or sugar manufacture and oil cakes; that the waste sugar is not, therefore, covered by Chapter 23 of the Tariff.

There is no force in the contention of Appellants that waste paper is not classifiable under sub-heading 4702.90. Upon showing of Heading 47.02 which covers recovered (waste and scrap) paper or paper board was shown to the appellant, they fairly, conceded that waste paper will be classifiable under sub-heading 4702.90. Accordingly, duty of excise is payable by them in respect of both these products.

It was held that the ratio of decision of the Andhra Pradesh High Court in case of Nizam Sugar is not applicable as the facts are completely different. In the said judgment, the respondents were claiming rebate in respect of duty on sugar under a notification. In that context, the High Court held that expression ‘sugar produced by a manufacturer’ in the notification would not take any other kind of sugar to entitle the manufacturer to claim the benefit of rebate and it is only by re-processing that the dirty sugar has ultimately become marketable sugar and therefore, the expression sugar produced does not take in within its fold every kind of sugar in the process of transformation.

With regard to Gravura printing cylinders, it was noted that the Commissioner (Appeals) has given his finding that appellants had availed of MODVAT credit under Rule 57Q on these cylinders, and had sent them to the supplier who was adjusting the price of used cylinders towards the cost of the new cylinder supplied by him. The Commissioner (Appeals) has, therefore, held that the provisions of Rule 57S(2)(c) are attracted and duty is payable by the Appellants. The Tribunal found no reason to interfere with the finding of the Commissioner (Appeals) as the said sub-rule clearly provides that where capital goods are sold as waste and scrap, the manufacturer shall pay duty leviable on such waste and scrap.

Decision:- Appeal partly allowed.

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PJ/Case Laws/2011-12/1333

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