M/S Pure Drinks Ltd. vs Uoi & Ors.
2011 Latest Caselaw 3280 Del

*                      THE HIGH COURT OF DELHI AT NEW DELHI

                                     Judgment reserved on: 05.07.2011
%                                    Judgment delivered on: 12.07.2011

+                           CEAR No. 5/2001


M/s PURE DRINKS LTD.                                   ...... APPELLANT


                                          Vs


UOI & ORS.                                             ..... RESPONDENTS

Advocates who appeared in this case:

For the Appellant:          Mr P.C. Jain, Advocate
For the Respondents:        Mr. Satish Kumar, Sr. Standing Counsel

CORAM :-
HON‟BLE MR JUSTICE SANJAY KISHAN KAUL
HON'BLE MR JUSTICE RAJIV SHAKDHER

1.     Whether the Reporters of local papers may              Yes
        be allowed to see the judgment ?
2.     To be referred to Reporters or not ?                   Yes
3.     Whether the judgment should be reported                Yes
        in the Digest ?

RAJIV SHAKDHER, J

1. By an order dated 23.07.2001 passed by this court the Central

Excise Gold Tribunal, now referred to as Central Excise and Service Tax

Appellate Tribunal (hereinafter referred to as „Tribunal‟) had directed a

reference in respect of the following question of law:

"Whether the Tribunal was justified in its view regarding applicability of Rule 57F(1)-(5) of the Central Excise Rules, 1944."

2. It appears that pursuant to the order of this court dated

23.07.2001 a statement of case dated 03.10.2006 was submitted by the

Tribunal. Since this court was not satisfied with the facts articulated in

the said statement of case; vide order dated 07.12.2007 it had directed

the Tribunal to submit an appropriate statement of case. However,

curiously, order dated 07.12.2007 was not complied with.

Consequently, by yet another order dated 09.11.2009, this court

directed the Tribunal to submit a statement of case within four weeks of

receipt of its order. Accordingly, a fresh statement of case has been

received by us.

3. The facts gleaned from the statement of case indicate that the

appellant before us at the relevant point in time manufactured aerated

water which fell under chapter 22 of the Central Excise Tariff Act, 1985

(hereinafter referred to as the „said Act‟) at the relevant point in time.

For the purposes of its business, the appellant, it appears procured duty

paid glass bottles, on lease basis, from various suppliers which were

used for the purposes of manufacturing its final products, i.e., aerated

water.

3.1 In this context the dispute of the appellant with the revenue thus

pertains to the following two kinds of transactions:

3.2 The first set of transactions being sale of glass bottles, which

evidently, either broke or were rendered unusable due to constant use

during the course of bottling of aerated water. These bottles were

treated as waste and / or scrap by the appellant. These damaged glass

bottles were apparently cleared by the appellant over a period

commencing on 25.07.1991 and ending on 19.10.1995. The total value

of the clearance during this period was in the sum of `.57,20,390/-. The

value of such damaged goods cleared are further sub divided by the

revenue, into two periods. The first period being: 25.07.1991 to

28.02.1994. The damaged goods cleared during this period were

valued by the revenue, at ` 24,25,810/-. Since the rate of duty

prevalent during this period was nil; we are not required to deal with

clearance made between this period, i.e., 25.07.1991 and 28.02.1994.

The latter period, with which we are concerned, begins from 01.03.1994

and ends on 19.10.1995. The value of waste and/or scrap cleared is

pegged at ` 32,94,580/-. The duty payable, according to the revenue, in

respect of these clearances is a sum of ` 6,58,917/- calculated at the

rate of 20% ad valorem under the said Act. This is in so far as the first

transaction is concerned.

3.3 The second set of transactions in respect of which there is a

dispute between the appellant and the revenue pertain to sale of glass

bottles during the period 1992 to 1995 valued at ` 1,04,85,610/-. The

central excise duty payable by appellant, according to the revenue, on

these transactions is a sum of ` 36,19,247/-.

4. In view of the above, a show cause notice dated 04.03.1997 was

issued to the appellant, whereby the appellant was called upon to

respond as to why excise duty in the sum of ` 42,78,164/- ought not to

be levied in respect of sale of waste and/or scrap of glass bottles and on

the value of sale of glass bottles. Furthermore, on account of the above

clearances having been made without payment of excise duty, penalty

was also sought to be levied.

4.1 Upon receipt of the reply of the appellant, the Commissioner of

Central Excise, Delhi - I (in short „the Commissioner‟) passed an order-

in-original dated 01.05.1998. The Commissioner confirmed the demand

raised in the aforementioned show cause notice.

5. Being aggrieved by the order of the Commissioner, the appellant

carried the matter in appeal to the Tribunal. The Tribunal by an order

dated 31.07.2000, rejected the appeal preferred against the order of the

Commissioner.

6. As indicated above, on a reference sought by the appellant, a

question of law was framed to seek an opinion of this court.

7. Mr Jain, who appeared for the appellant has argued that in so far

as the first transaction is concerned, which pertains to sale of waste

and/or scrap comprising of broken bottles and / or unusable bottles, the

provisions of Section 57F(5) of the Central Excise Rules, 1944

(hereinafter referred to as „Rules‟) has been applied. It is argued that

the said Rule, i.e., Rule 57F(5) would have no applicability as the

appellant is not in the business of manufacturing glass bottles; the only

use to which the glass bottles supplied to it are put to IS to fill aerated

water; which is, the final product manufactured by the appellant. It is

submitted that the question of payment of duty on waste and/or scrap

comprising of broken and/or unusable glass bottles, would arise only if

the appellant was the manufacturer of the glass bottles.

7.1 It was also argued by Mr Jain that the chapter sub-heading under

which duty was sought to be levied (i.e., sub-heading no. 7001.10)

pertained to "cullets and other waste and scrap of glass" and not broken

and unusable glass bottles. It was sought to be argued that glass

bottles were not cullets and therefore, the waste and scrap of glass had

to be read in the context of the meaning attributable to the word cullets.

The argument being that the scope of the sub-heading could not be

expanded to include the waste and/or scrap of glass bottles. The

imposition of excise duty under the said sub-heading was, therefore,

clearly erroneous.

7.2 As regards the second transaction which involved the invocation of

the provisions of Rule 57F(1)(ii) of the said Rules, it was submitted that

it could only be triggered if there was a physical removal of the glass

bottles for the purposes of home consumption. In order to drive home

the point, Mr Jain relied upon the latter part of the said Rule, i.e., Rule

57F(1) (ii), wherein there is a reference to „export under bond‟. Mr Jain

thus contended that export would invariably involve a physical removal

of goods, and thus on a parity of reasoning the first limb of the rule

which dealt with removal for home consumption should also mean

physical removal in order to trigger the provisions of Rule 57F(1)(ii).

Since, such was not the situation obtaining in the instant case, as there

was only a leasing arrangement between the appellant and the leasing

companies qua the glass bottles used for filling up the final product, i.e.,

aerated water; Rule 57F(1)(ii) was not appropriately invoked.

7.3 It was submitted that the physical possession of the bottles

remained with the appellant, and that the entry in the balance sheet

suggesting sale of glass bottles was only a „paper transaction‟ not

amounting to actual sale.

8. As against the above, Mr Satish Kumar, who appeared for the

revenue submitted that if the appellant were to raise an argument

pertaining to the applicability of a particular sub-heading and thereby in

sum and substance impugning the rate of duty imposed or the value of

goods, the present appeal would not be maintainable in view of the

provisions of section 35L(b) of the Central Excise Act, 1994. Mr Satish

Kumar submitted that in such an eventuality, appeal would lie to the

Supreme Court and not with the High Court.

8.1 In so far as the first set of transactions was concerned, Mr Satish

Kumar submitted that the finding returned by the authorities below

ought to be sustained. It was submitted that it was not disputed that

the appellant had availed of MODVAT credit on glass bottles which were

used by it to fill and market thereafter aerated water; being the final

product. It is during the course of the handling of such glass bottles that

they either broke or become unusable due to constant re-use. This

breakage and /or re-use generated waste and/or scrap of such like glass

bottles. It was further contended that admittedly such glass bottles

which were dealt as waste and/or scrap were sold by the appellant

admittedly, at least, twice or three times a week. Therefore, the

revenue has correctly invoked the provisions of sub-rule (5) of Rule

57F,as it was waste which arose on processing of inputs in respect of

which MODVAT credit had been availed of and therefore, could be

removed only on payment of duty. The argument that the appellant was

not the manufacturer of glass bottles did not arise since, the appellant

had availed of MODVAT credit by treating the glass bottles as inputs.

The expression used in rule 57F(5) was „processing of inputs‟, which

covered the fact situation obtaining in the instant case and, therefore,

any waste as a consequence of the same could be removed only on

payment of duty.

8.2 As regards the second set of transactions which involved sale of

glass bottles, the learned counsel for the revenue submitted that the

appellant having availed of MODVAT credit, it could have sold the glass

bottles to a third party only on payment of excise duty equivalent to the

MODVAT credit availed of by it. The fact that physical possession of the

bottles in issue, remained with the appellant was not relevant since the

property in the goods in issue, stood transferred to a third party.

9. We have heard the learned counsel for the parties. As indicated in

the very beginning of our judgment, there are two sets of transactions in

respect of which duty is sought to be levied by the revenue. The first

set of transactions relate to duty levied on account of removal of scrap

and/or waste (generated on breakage of glass bottles and/or their

constant re-use) without payment of duty by the appellant between

01.03.1994 to 19.10.1995. Undoubtedly the appellant has availed of

MODVAT credit in respect of scrap cleared in the aforesaid period. The

issue, therefore, which arises for consideration is, as to whether such

clearances of waste and/or scrap could be made without payment of

duty. The revenue has invoked provisions of Rule 57F(5) to contend that

such clearances could have been made only on payment of duty. This is

contested by the appellant on the ground that it is not the manufacturer

of glass bottles, and hence the said provision has no applicability. For

the sake of convenience Rule 57F(5) is culled out hereinbelow:

"(5). Any waste arising from the processing of inputs, in respect of which credit has been taken may-

(a) Be removed on payment of duty as if such waste is manufactured in the factory; or

(b) Be removed without payment of duty, where it belongs to such class or category of waste as the Central Government may from time to time by order specify for the purpose for being used in the manufacture of the class or categories of goods as may be specified in the said order, subject to the procedure under Chapter X being followed; or

(c) Be destroyed in the presence of proper officer on the application by the manufacturer, and if found unfit for further use, or not worth the duty payable thereon, the duty payable thereon being remitted.

Provided that such waste may be destroyed by the manufacturer governed by Chapter VIIA after informing the proper officer in writing regarding the quantity of such waste and the date on which he proposes to destroy at least seven days in advance and after observing all such conditions as may be prescribed by the Collector of Central Excise by a general or special order with regard to the manner of disposal of such waste."

10. It is quite evident that sub-clause (a) of clause (5) of Rule 57F

would require removal of waste which arises from processing of inputs

(in respect of which MODVAT credit has been availed of) only on

payment of duty. In contradistinction clause (b) provides for removal of

waste without payment of duty, only where it belongs to such class or

category of waste as the Central Government may from time to time

specify in its order, for the purpose of being used in the manufacture of

the class or categories of goods as indicated therein. The question,

therefore, which arises for consideration is whether waste and/or scrap

which has arisen in the instant case by virtue of breakage of glass

bottles or their constant re-use, in respect of which undoubtedly

MODVAT credit has been claimed, can be removed without the payment

of duty notwithstanding the fact that the appellant is not the

manufacturer of the glass bottles. In our view no such leeway is given.

The provision of clause (5) when read with sub-clause (a) of Rule 57F,

make it clear that „any waste‟ which arises from „processing of inputs‟

can only be removed only on payment of duty as if such waste is

manufactured in the factory. Therefore, the expression any waste

arising from processing of inputs, would include that waste which would

arise on account of inputs, in this case glass bottles, being used at

various stages of manufacture. Sub-clause (a) of clause (5) introduces a

fiction by clearly stating in so many words that such waste is deemed as

having been manufactured in the factory. Therefore, merely because

the appellant was not manufacturer of the glass bottles which generated

the waste could not be a reason which would enable the appellant to

remove the said waste without payment of duty contrary to the

provisions of Rule 57 F (5)(a). The appellant having done exactly the

same, has correctly been found to have evaded the payment of duty to

that extent.

11. This brings us to the another aspect of the matter argued before

us, which was, that the sub-heading 7001.10, under which, waste and/or

scrap of glass bottles was sought to be subjected to excise duty would

not fall under the said sub-heading. In our view this was not the case

set up by the appellant before the Tribunal. However, if such a plea is

raised then the argument of Mr Satish Kumar would have decidedly

much force, which is, that if the appellant were to persist on this line the

present appeal would not be maintainable. Mr Jain when confronted

with this position had submitted during the course of the arguments that

he was more on the scope of the sub-heading and not on its

applicability. According to us even this submission is misconceived. The

heading 70.01 and sub-heading 7001.10 read as follows:

"70.10: Cullet and other waste and scrap of glass; glass in the mass; glass in balls (other than microspheres of heading NO. 70.13); rods or tunes, unworked.

7001.10 Cullet and other waste and scrap of glass....."

12. A perusal of the heading and the sub-heading would show that it is

far wider in scope than what is sought to be contended. The submission

of Mr Jain that the waste and/or scrap of glass-bottles should be confined

to the waste of the nature of cullets is misconceived. Cullet, according

to the plain dictionary meaning, is nothing but recycled waste material

or broken glass used in glass making. The heading 7001 when read with

the sub-heading clearly indicates that the sub-heading takes within its

ambit every kind of waste generated from glass. If the intention of the

legislature was to confine to waste of the nature of cullets then it need

not have inserted in the sub-heading the word „cullet‟ and „other waste‟.

The expression of „other waste‟ would then be a surplusage. Thus we

are not inclined to accept this contention made on behalf of the

appellant. We find no infirmity with the conclusion arrived at by the

authorities below, on this aspect of the transaction.

13. This brings us to the second set of transactions which involves sale

of glass bottles. In this case the value of glass bottles removed/cleared

amount to ` 1,04,85,610/-. As indicated above, the period during which

clearance/removal of glass bottles took place spanned between 1992 to

1995. The revenue has sought to impose excise duty in the sum of

` 36,19,247/-. It is not in dispute that in this case as well, MODVAT

credit has been claimed by the appellant. The appellant, however,

claims that even though in the books of accounts and its balance sheet

sale has been recorded, there is in fact no sale since, the physical

possession of the goods remained with the appellant. In other words as

contended by Mr Jain, it was merely a paper transaction. The argument

thus put forth on behalf of the appellant was that in order to bring the

transaction within the provisions of Rule 57(1)(ii) there ought to be a

physical removal of the glass bottles from the factory of the appellant;

since the glass bottles were covered under a leasing arrangement the

said provision was not attracted. Before we proceed further it may be

relevant at this stage to extract provisions of rule 57F(1)(i) and (ii). The

said is extracted as under:

"The inputs in respect of which a credit of duty has been allowed under rule 57A may -

(i). Be used in or in relation to, the manufacture of final products for which such inputs have been brought into the factory; or

(ii). Shall be removed after intimating the Assistant Collector of Central Excise having jurisdiction over factory and obtaining a dated acknowledgement of the same from the factory for home consumption or for export under bond, as if such inputs have been manufactured in the said factory. Provided that where the inputs are removed from the factory for home consumption on payment of duty of excise, such duty of excise shall in no case be less than the amount of credit that has been allowed in respect of such inputs under Rule 57A."

14. In our view the averments made by the appellant with regard to

the manner in which the said transactions got reflected in its account

being relevant, are extracted hereinafter from order of the

Commissioner :

"...As regards the sales of bottles, the factual position is that no sale actually takes place. It is only leasing arrangement between the party and the leasing companies as a measure of financial management. To illustrate the point, supposing, 100 bottles are taken on lease from a leasing company called X, a periodical (usually monthly) payment is made to the leasing company which is inclusive of their interest and other servicing charges. After the full payment of these 100 bottles has been made, the user company (in this case the party) technically sells (only on papers) bottles to the leasing company and the repayment arrangement to the leasing company is repeated as in the previous cycle. Therefore, the entry in the balance sheet towards profit, on account of sale of bottles is only on account of transactions entered into

between the leasing company and the party on account of leasing tie-up and not on account of actual sale of bottles. The physical possession of the bottles is not parted with remains only with the party for use." (emphasis is ours)

15. The question which arises for our consideration is as to whether

the word „removal‟ would require a physical removal of goods in the

case of the transaction at hand. Rule 57F deals with the manner of

utilization of inputs and the credit allowed in respect of the duty paid on

such inputs. Sub-rule (i) of rule 57F(1) clearly provides that inputs in

respect of which credit of duty has been allowed under Rule 57A may be

used in or in relation to manufacture of the final products for which

inputs had been brought into the factory of the appellant. Sub-clause (ii)

of Rule 57F(1) permits removal from the factory of inputs for home

consumption or for export only on payment of excise duty which, in no

case can be less than the credit allowed in respect of such inputs under

Rule 57FA; after information in that regard is given to the Assistant

Collector of Central Excise having jurisdiction over the factory and on

obtaining acknowledgement in regard to the same. On the appellant‟s

own showing the glass bottles were sold under a leasing arrangement

albeit on paper. The arrangement is so devised that although the

appellant paid money on a monthly basis to a third party in respect of

which profit has been recorded in its books of accounts, the bottles

remained in possession of the appellant. The fact remains that

notwithstanding this contrivance MODVAT credit was claimed by the

appellant. Therefore, could it be said that in the instant circumstances,

the invocation of provisions of Rule 57F(1)(ii) by the revenue to claim

excise duty to the extent of MODVAT credit claimed by the appellant is

bad in law as there was no physical removal of the goods in issue.

15.1 A somewhat similar situation arose in the case of Commissioner of

Central Excise, Belgaum vs Associated Cement Company Ltd 2009 (236)

ELT 240 before the Karnataka High Court. The High Court of Karnataka

rendered its decision in the said case on 13.12.2007 passed in CEA No.

3/2005. The facts obtaining in the said case were as follows: The

assessee was engaged in the manufacture of cement. The assessee for

the purpose of his business had installed a captive power unit for

generating power for its cement factory. During the period 01.03.1994

to 14.01.1999 the assessee had availed MODVAT credit on capital goods

in respect of the said captive power unit in terms of Rule 57Q as it then

obtained. The assessee sold its power unit to TATA Electric Company

Ltd. While doing so the assessee leased in favour of purchaser, i.e., Tata

Electric Company Ltd. the land on which the captive power unit was

installed for a period of 20 years from the date of the sale of the captive

power unit. Since the assessee had sold the captive power unit on

which it had availed MODVAT Credit, the excise authorities issued a

show cause notice demanding payment of central excise duty in respect

of the aforementioned capital goods under the provisions of Section

11A(2) and proviso to Section 11A(1) of the Central Excise Act, 1944

read with Rule 57AB(1)(b) and the explanation appended to the said

Rules. Interest and penalty was also sought to be recovered from the

assessee by virtue of the aforementioned show cause notice. The

Commissioner while passing the adjudication order confirmed the

demand raised in the show cause notice.

15.2 The assessee being aggrieved preferred an appeal to the Tribunal

contending that there was no violation of the MODVAT credit rules since

the capital goods formed part of the captive power unit which had not

been removed from the premises of the assessee where, the unit was

installed. The Tribunal concurred with the stand taken by the assessee

and hence proceeded to set aside the order of the Commissioner.

15.3 The revenue being aggrieved preferred an appeal to the High

Court. The High Court was thus called upon to answer the following

substantial question of law:

"Whether the Tribunal was justified in holding that the capital goods in respect whereof MODVAT credit was availed by the assessee company were not removed by it from the premises of its factory even though it sold the entire power unit to M.s Tata Electric Company for a consideration of Rs 90 crores and leased to the said purchaser for 20 years the premises wherein the unit was installed and thus it did not contravene any provisions of Central Excise Act, 1944/Central Excise Rues, 1944/Central Excise Rules, 1944?" (emphasis is ours) 15.4 The High Court while dealing with the rival contentions rejected

the plea raised by the assessee and reversed the order of the Tribunal.

The observations made by the High Court while coming to the said

conclusion being relevant are extracted hereinafter:

"5. Having heard the learned counsel for the parties and on perusal of the agreement dated 14-3-1999 entered into between the assessee and m/s Tata Electric Company we have no hesitation to hold that the transaction thereunder

between them was an absolute sale of the power unit for a valid sale consideration of Rs 90 crores and that the entire unit came to be handed over to the purchaser and since then the purchaser has been running the power unit at the same premises of the assessee by taking the premises in which the power unit was installed as long term lease and generating the power. Therefore, it is clear that the said purchaser, after purchasing the power unit from the assessee, has been enjoying the same as its absolute owner and has been supplying to the assessee the power generated from the said power unit on payment basis. This being so it is quite evident that the assessee-company lost its ownership and also control over the said power unit by selling it to the said purchaser for valid consideration and by giving to the purchaser on long term lease the premises in which the said unit is installed so as to enable the purchaser to run the unit at the same premises of the assessee as its absolute owner, generate power and sell the power so generated to the assessee company itself.

6. Therefore, in our considered view though there had been no physical removal of power unit the above transactions between the assessee-company and M/s Tata Electric Company certainly amount to nothing short of physical removal of the power unit of the assessee in respect whereof MODVAT credit was availed by the assessee so as to attract the penal provisions of the said Act and the Rules. The said transactions of sale of power unit and simultaneous lease of premises are wisely resorted to by the assessee as a device to avoid the tax liability on it on the ground that the power unit was not physically removed from the premises of the assessee. Therefore, we are of the considered opinion that the Tribunal without application of mind and without proper appreciation of the said transactions in the light of the

relevant provisions of the Central Excise Act, 1944 and the Rules has allowed the appeal of the assessee-company and set aside the Order-in-Original passed by the Commissioner of Central Excise, Belgaum. In the circumstances, we answer the above question of law in the „negative‟ and against the assessee." (Emphasis is ours) 15.5 A similar view appears to have been taken by the Northern Bench

of the Tribunal, at New Delhi in the case of Majestic Auto Ltd. vs

Commissioner of Central Excise, Ghaziabad 2004 (173) ELT 145 (Tri-

Delhi). The Tribunal in the said case was construing the provisions of

Rule 57S. the said Rule reads as follows:

"may be (i) used in the factory of the manufacturer of the final products; or (ii) removed, after intimating the Assistant Commissioner of Central Excise having jurisdiction over the factory and after obtaining dated acknowledgement of the same, from the factory for home consumption or for export for payment of appropriate duty of excise leviable thereon or for export under bond, as if the capital goods have been manufactured in the said factory."

15.6 The Tribunal made the following observations in regard to the

construction of the Rule:

"As the premises in which the capital goods are installed has now been leased to the Appellants No. 2 who are now in possession of the said premises, it cannot be claimed by the Appellants No. 1 that the capital goods are used in their factory. The capital goods are no more installed in the factory of the Appellant No. 1 and as these are now in the factory premises of another manufacturer (i.e., Appellants No. 2), the same have been removed from the factory for home

consumption. In terms of provisions of clause (ii) of sub-rule (1) of Rule 57S, the same should have been removed -

(a) after intimating the Assistant Commissioner of Central Excise having jurisdiction over the factory;

(b) after obtaining dated acknowledgement of the same; and

(c) on payment of appropriate duty of excise leviable thereon as if such capital goods have been manufactured in their factory.

Thus the Appellants No. 1 is liable to pay the duty on the impugned capital goods. A penalty is also impossible on them as they have not complied with the conditions specified in Rule 57S for the utilization of the capital goods. We do not find any substance in learned Advocate‟s submission that the appellants No. 1, being not manufacturer, is not liable to pay duty. The appellant No. 1 has availed of Modvat credit of the duty paid on goods and as such all the conditions of the Central Excise Rules in this regard would apply. The provisions of Rule 57S, as mentioned hereinbefore, are very clear and specific that duty has to be discharged by the manufacturer who has taken the Modvat credit "as if such capital goods have been manufactured" in his factory."

16. We are in respectful agreement with the view expressed and the

line of reasoning adopted by the Karnataka High Court in the case of

Associated Cement Ltd. (supra). The submission of the appellant, if

accepted, would render the purpose of the rule nugatory. In built in the

Rule 57F(1)(ii) is the deeming fiction that goods are manufactured. The

physical removal of the goods from the place of manufacture cannot be

the criteria for subjecting the goods to imposition of excise duty as in

our view such an interpretation would render the MODVAT scheme

unworkable as it would give premium to an obvious attempt at evading

tax. Even otherwise, the onus in these facts whether or not there had

been physical removal would be on the assessee.

17. Before We conclude we may point out that in support of his

submission pertaining to the second set of transaction Mr Jain had relied

upon the judgment in the case of Indorama Synthetics (I) Ltd. vs

Commissioner of Central Excise, Nagpur 2005 (190) ELT 193. The

Western Zonal Bench of the Tribunal while deciding the issue involved

had inter alia relied upon its own judgment in the case of Associated

Cement Ltd. (supra) which was reversed by a Division Bench of the

Karnataka High Court; a reference to which has been made by us

hereinabove. Therefore, since we have applied the same line of

reasoning, this judgment would have no applicability.

18. The other judgment relied upon by Mr Jain is also of the special

Bench (New Delhi) of the Tribunal in the case of Anand Polyrotex vs

Collector of Central Excise 1991 (56) ELT 537 (Tribunal). The judgment

being cryptic, the facts which we have been able to glean from the

report evidently are as follows: The appellant before the Tribunal was

using duty paid raw material covered under chapter 39. In this case, the

issue which arose, was that whether waste could be removed on

payment of duty if, it was otherwise not dutiable, due to it, being

covered under an exemption notification. In our view this case would

not help the cause of the appellant as, the issue that arises in the

present case is whether the word removal appearing in rule 57F(1)(ii)

had to be construed (in the context of facts obtaining in the instant

case) as physical removal. There is no discussion on this aspect of the

matter in Anand Polyrotex (supra).

19. In the aforesaid circumstances, the question of law is answered in

the affirmative and against the assessee. Accordingly, the appeal

stands disposed of.

RAJIV SHAKDHER, J

SANJAY KISHAN KAUL,J JULY 12, 2011 kk