ORDER
C.N.B. Nair, Member (T)
1. The appellant, as a small scale unit, engaged in the manufacture of brass parts which are liable to central excise duty under Chapters 74, 83, 84, 87 etc. As a small scale unit, they are eligible for exemption under Notification No. 1/93 dated 28.2.93.
2. During the manufacture of parts, certain amount of metal becomes waste and scrap. Appellants cleared such waste and scrap to another manufacturer for recycling into original metal rods. Metal so retrieved, is brought back and used by the appellant in the manufacture of parts. Exemption under Notification No. 1/93 is with regard to the aggregate value of specified (in the annexure to the Notification) goods cleared by a manufacturer. However, the value of captively consumed goods is to be excluded while computing the aggregate value. The impugned orders have held that the aggregate value of goods cleared by the appellants should be worked out by including the value of waste and scrap arising during the manufacture of parts and sent for re-melting. On account of that, a duty demand of Rs. 41,069/- has been raised in the impugned orders.
3. Submission of the appellants is that since they are reconverting the waste and scrap into original metal, though at another manufacturers premises under Rule 57F(5) of Central Excise Act 1944, the value of the scrap so used should be treated as (sic) under Explanation 6 of the Notification No. 1/93. The appellants have also relied on several decisions in support of their claim.
4. As against this, the Revenue has contended that the Explanation 6 covers only specified goods which are used for further manufacture of specified goods “within factory of production of inputs” and not goods which are taken out of the factory of production for manufacture in other premises.
5. None appeared for hearing on behalf of the appellants. Instead, a letter seeking adjournment has been filed on behalf of the appellant’s Counsel Shri Shailesh P. Sheth. This is a very old appeal. Therefore, we proceed to dispose of the appeal without granting the adjournment.
6. We have perused the records and have heard the Id. SDR. The contention of the assessee that despite the removal of the waste and scrap outside the factory for conversion under Rule 57F(5) the case be treated only as one of captive consumption by the appellant. It is their submission that mere carrying out of some process outside the factory should not lead to loss of a benefit rightly entitled to the appellant. Appellant’s submission is that exemption Notification should be read in its entirety and considered as a whole and in a manner so as serve its object and purpose as held by the Apex Court in the case of Tata Oil Mills Co. Ltd. – 1989 (43) ELT 183 (SC). According to the appellant in the present case, intention is to exclude goods which are further manufactured while computing the quantity of clearance. Admittedly, the waste and scrap are not sold. They are only being consumed for retrieving the metal for further production. It is therefore, being contended that recycling of the scrap is essentially captive consumption.
7. We find merit in the appellant’s case. Exemption under Notification No. 1/93 is for goods manufactured and sold by a small scale unit. Goods manufactured by the appellant manufacturer are various parts liable to central excise duty under Chapters 74, 83, 84, 87 etc. The appellant is not engaged in the manufacture of waste and scrap. They merely arise in the manufacture of the parts. Waste and scrap cannot be called specified goods manufactured by the appellant. That being the case, the value of waste and scrap cannot find a place while computing aggregate value of the specified goods produced and cleared by the appellants. That also goes against the object and purpose of the notification.
9. In the view we have taken above, the appeal succeeds and is allowed with consequential relief if any, to the appellants.
(Pronounced in open Court on 11.12.2003)