ORDER
G.R. Sharma, Member (T)
1. Collector, Central Excise, Ahmedabad has challenged the order of the Collector Central Excise (Appeals). The Collector (Appeals) had held :-
“I have considered the matter and it is clear that the appellants have a case. As the appellants have correctly pointed out, Explanation to Item 18-IV would make it clear that the said item only covers waste arising in the manufacture of man-made filament yarn and not in the case of waste of duty paid filament yarn arising in the manufacture of texturised yam or defective textured yarn. The same is also not known in trade or common parlance as damaged textured yarn or waste of texturised yarn, it is only a waste of duty paid filament yarn and is as such wholly exempt from duty in terms of Notification No. 239/83. Approving the classification list directing the payment of duty @ Rs. 9/- per kg. as such waste was not tenable.
In the result, the appeal succeeds and is accordingly allowed. The impugned order is set aside with directions for classifying the said waste, as exempt from duty, as against Rs. 9/- per kg.”
2. Briefly stated the facts of the case are that the respondents manufacture texturised yarn out of duty paid waste yarn (Polyster filament yarn) and filed classification list dated 29-4-1982 wherein the respondents claimed assessment of waste arising in the process of texturing the duty paid filament yarn at concessional rate of duty of Rs. 2/- per kg under Notification No. 214/79 dated 23-6-1979. The Asstt. Collector, however, held that the waste of texturised yarn is assessable at Rs. 9/- per kg under Tariff Item 18-IV. When the respondent went in appeal to the Collector Central Excise (Appeals), the Collector (Appeals) held that approving the classification list directing payment of duty at the rate of Rs. 9/- per kg. on such waste was not sustainable.
3. The respondent has requested that the case may be decided on merits. The department was represented by Shri M.K. Jain, the ld. SDR. The respondents have submitted that waste arising from texturised yarn does not fall under Tariff Item 18-IV in as much as the explanation below the said Item reads :-
“Explanation – This item includes only wastes arising in or in relation to the manufacture of man-made fibres (Other than mineral fibres) and man-made filament yarns.”
It has been contended by the respondents that filament yarn and texturised yarn are two different commodities known in the market and commercial trade parlance and accordingly these two items are covered by different Tariff Headings and are assessable to duty at different rates; that duty on filament yarn is required to be paid before it is used in the manufacture of texturised filament yarn; that the rate of duty on texturised filament yarn was Rs. 5 per kg during the material period if the duty on base yarn (filament yarn or POY) was paid; that the direction of the Asstt. Collector that duty on the waste arising in the process of texturising of the yarn should be paid at a rate of Rs. 5/- per kg does not appeal to common sense in as much as waste cannot be charged at a higher rate than the virgin material. It was also contended by the respondents that as the waste produced by them was not classifiable under Tariff Item 18-IV, Notification No. 53/72 will not be applicable on this waste. It was also pleaded that the hard waste of filament yarn shall be classifiable only under Tariff Item 18 of the then Tariff; that two issues arise for consideration. One is that the waste may be out of duty paid filament yarn and the second is that it may arise out of the texturised filament yarn; that even considering it as a waste of texturised filament yarn falling under Item 18-II it will be exempted under Notification No. 172/72. The respondent, therefore, submitted that there was no justification to classify such waste under the then Tariff Item 18-IV to assess it at Rs. 9/- per kg.
4. Shri M.K. Jain, the ld. SDR submitted that the exemption was for crimped yarn wastes and not for other yarns; that for other wastages the duty was chargeable at a rate of Rs. 9/- per kg; that Notn. No. 214/79 exempted only crimped yarn waste classifiable under Tariff Item 18-IV. He reiterated the findings of the Asstt. Collector and the grounds of appeal pleaded by the Collector. In the grounds of appeal, it has been contended that in accordance with Notn. No. 214/79 waste arising during the manufacture of crimped yarn and falling under Tariff sub-item IV of Item 18 of Central Excise Tariff were exempted from so much of duty of Excise leviable thereon as was in excess of Rs. 2/- per kg; that waste arising during the manufacture of texturised yarn, (other than texturised crimped yarn) could not fall within the scope of this notification and therefore the waste texturised yarn was correctly, liable to duty at the rate of Rs. 9/- per kg. prescribed under the then Tariff Item 18-IV; that the amending Notification No. 239/83 exempted non-cellulosic waste falling under sub-item IV of Item 18 of Central Excise Tariff and arising during the manufacture of non-cellulosic texturised from the whole of duty of excise leviable thereon; that in view of the above, waste texturised yarn was liable to duty at the rate of Rs. 9/- per kg as was held by the Asstt. Collector and that Notification No. 239/83 was not applicable to the goods in dispute.
5. Heard the submissions of the ld. SDR and perused the written submissions made by the respondent. The issue for decision before us is whether non-cellulosic waste arising in the manufacture of texturised yarn out of duty-paid filament yarn is liable to duty at the rate of Rs. 9/- per kg under the then Tariff Item 18-IV.
6. On careful consideration of the entire material on record, we find that the main plea of the department is that the disputed goods fall under the then Tariff Item 18-IV and are, therefore, liable to duty at the rate of Rs. 9/- per kg. For determination of the rate of duty, classification of the goods is an essential requirement. We have to see whether the goods in dispute would be classifiable under the then Tariff Item 18-IV or not. For proper appreciation of the requirement of classification under Tariff Item 18-IV the same is reproduced as under :-
“IV. – Non-cellulosic waste, all sorts.
Explanation. – This item includes only wastes arising in or in relation to the manufacture of man-made fibres (other than mineral fibres) and man-made filament yarn.”
Examining this clarification for classifying goods under the then Tariff Item, we find that Tariff Item 18-IV includes only wastes arising in the manufacture of man-made fibres and man-made filament yarns. The goods in dispute (waste) do not arise in either of these processes but arise in the process of conversion of duty-paid filament yarn into texturised yarn. We, therefore, hold that the waste in dispute cannot be classified under the then Tariff Item 18-IV. Further, we find that duty on textured yarn is only Rs. 5/- if it is manufactured out of duty-paid base yarn. It, therefore, does not appeal to common sense as to how duty on good yarn could be only Rs. 5/- and duty on wastes could be Rs. 9/- per kg., therefore they will not be liable to pay duty at the rate of Rs. 9/- per kg.
7. In view of the above discussions, we hold that the waste in dispute is not classifiable under the then Tariff Item 18-IV, and therefore, was not liable to be assessed at a rate of Rs. 9/- per kg. In this view of the matter, the impugned order is upheld and the appeal is rejected.