ORDER
S. Kalyanam, Member (J)
1. This is an application for waiver of pre-deposit of a duty of Rs. 42,91,363/- and a penalty of Rs.
1,00,000/- levied on the petitioner under the impugned order of the Collector
of Central Excise, Madras, dated 26-11-1992.
2. Shri Arvind P. Datar, the learned Counsel for the petitioner submitted that duty demanded is alleged to be differential duty on such quantity of 210 D Nylon yarn cleared at concessional/new rate of duty in terms of Notification 188A/62 dated 3-11-1962 as amended by Notification 48/90 dated 20-3-1990, as amended by Notification 52/91 dated 25-7-1991 for the period June 1987 to February 1992 by issue of show cause notice dated 29-6-1992 by invoking the longer period of limitation in terms of Section 11A of the Central Excises & Salt Act, 1944. It was submitted that the goods cleared are used for manufacture and repair of fishing nets/parachute cords in terms of the Notification cited supra at concessional rate of duty. It was submitted that the goods cleared from the petitioner’s factory to the premises of the convertor or job worker where they were twised into twine for manufacture or repair of fishing nets/parachute cords and the goods after the said conversion did not come back to the petitioner’s factory at all but only were taken to the petitioner’s godown directly from the convertors. It was submitted that the petitioner Unit is admittedly under the physical control and therefore AR-1 form is countersigned as and when the Nylon yarn is cleared for conversion into twisted yarn or twine by job worker. It was further submitted that in respect of manufacture of similar goods by other manufacturers i.e. M/s. Nirlon Ltd. and M/s.Garware Ltd., they were not paying any differential duty even though in their case also similar goods were cleared to the premises of job workers for manufacture of twine used for repair of fishing nets/parachute cords. The learned Counsel further submitted that even assuming for the purpose of arguments that the petitioner would be liable to pay duty, prima facie longer period of limitation cannot be invoked in view of the fact that the goods were cleared under the direct superintendence of the authorities inasmuch as the petitioner as operating under the physical control system. The learned Counsel further submitted that from the wording of the Notification it is very clear that the goods cleared are “meant for use in the manufacture or repair or both, of fish nets and parachute cords” and the wording is not that it should be “used in the manufacture of the said fishing nets or parachute cords. On a plain reading of the Notification, if the goods cleared are meant for use for repair or manufacture of fishing nets/ parachute goods as in the present case, the petitioner would be prima facie covered by the wording of the Notification. The learned Counsel in this context also placed reliance on the ruling of the Madras High Court in the case of Gopalsamy Industries v MMTC, reported in 1989 (39) E.L.T. 390 dealing with more or less similar situations where the Madras High Court was called upon to interpret the Notification 152/77 dated 15-7-1977 which is similarly worded, in regard to the end-use. The petitioner, the learned Counsel contended, cannot be called upon to pay duty in respect of any waste or yarn contained in the waste generated in the premises of the job worker and the learned Counsel drew an analogy that if the yarn was cleared on payment of duty under the Notification claiming exemption and if any waste is generated thereafter, the petitioner cannot be made to pay any duty.
3. Shri J.P. Gregory, the learned SDR adopted the reasoning of the learned adjudicating authority and mainly contended that the petitioner did not account for the waste in the RT 12 and RT 3 returns and therefore the petitioner would be liable to pay duty. The learned SDR further submitted that as directed by the Tribunal enquiries were made and it was seen that the other manufacturers referred to by the learned Counsel agreed to pay duty on the waste generated during the manufacture of fishing net twine/parachute cords and the learned SDR however, does not have any precise information as to whether in respect of the yarn contained in the waste generated at the premises of the job worker where similar manufacturing or conversion were being carried out, were called upon to pay duty or not. At this stage the learned Counsel also intervened to clarify that the petitioner is paying duty on the waste generated in the manufacture of Nylon yarn in the petitioner’s factory as other manufacturers.
4. We have carefully considered the submissions made before us. On going through the Notification we find that the wording of the Notification is that the goods should be “meant for use in the manufacture or repair of fishing nets or parachute cords”. The wording used is not that it should be “used in the manufacture of fishing nets or parachute cords etc.” In this context in our view, the ratio of the ruling of the Madras High Court cited supra would prima facie apply. The Madras High Court dealing with identical and similar condition against the levy of differential duty in regard to waste on a different Notification has observed as under:
“In this context it is relevant to note that in the letter written by the 1st Respondent it is clearly mentioned that out of the total quantities of metal released namely 0.500 MT and 1.500 MT the actual quantities consumed were 0.39755 MT and 1.189 MT & the wastes were 0.10245 MT and 0.311 MT respectively. Further as per the said letter the differential amount for 0.411345 MT works out to Rs 8152.66 at Rs. 18960/- per MT on concessional and non-concessional rates. There is absolutely no authority shown that when the entire metal supplied under the concessional rate has been utilised for the manufacture of watch straps and pen nibs, etc, if there is any wastage in the process of manufacture, whether there could be imposition of this duty on such wastages. The Customs Notification 152/77 dated 15-7-1977 does not contemplate such provision for imposition of such duty on wastages occurring in the process of manufacture. Further it is not the case of the respondents that the petitioner had kept away some of the raw materials supplied to him with some ulterior purposes. The 2nd respondent clearly admits that there is no specific provision available in the Customs Notification above extracted as to how the wastages occurring in the process of manufacture, can be dealt with for levying standard duty. In the absence of any such specific provision for imposition of standard duty on wastages as occurred in the present case, it is not open to the authorities concerned to levy standard duty on such wastages and any such imposition of standard duty in the absence of specific provision in the Notification issued by the Customs under Ref. No. 152/77 dated 16-7-1977 to that effect is not legal and is contrary to law. It is again and again submitted by the learned Counsel for the first respondent that the petitioner is accountable for the entire quantity of raw material supplied to him. As already stated that when once it has been established that the entire raw material supplied to the petitioner has been fully utilised for the purpose of manufacture for which the raw material has been supplied and in the absence of any specific provision in the Customs Notification No. 152/77 dated 15-7-1977 relating to wastages as occurred in the instant case, the contention of the first respondent cannot be accepted. Under these circumstances, I find that the demand for payment of duty is wrong, is not sustainable in law.”
We also find some force in the plea of the learned Counsel for the petitioner with reference to the applicability of longer period of limitation in the facts and circumstances of the case. We also note that there is no information on the part of the Department that similar manufacturers are paying duty in similar circumstances on the waste or the yarn contained in the waste generated at the job workers’ premises. In this context we also record the plea of the learned Counsel from the Bar that similar manufacturers in similar situation are not paying duty. The department was also directed to verify and enquire and report on this aspect and the Department has not received any instruction that similarly placed manufacturers have been paying duty. Therefore, taking note of the above facts and the totality of the facts and circumstances of the case and keeping in mind the applicability of prima facie the ratio of the ruling of the Madras High Court, we are inclined to think that the petitioner is entitled to grant of waiver of pre-deposit of duty and penalty pending appeal and stay of the recovery of the same pending appeal, and we order accordingly.
5. The appeal being a special Bench appeal, the papers are directed to be transmitted to the Central Registry, CEGAT, New Delhi.