Judgment

SABYASACHI MUKHARJI, J.:- This is an appeal under section 35L of the Central Excises & Salt Act, 1944 (hereinafter referred to as the Act) against the judgment and order dated 18th August, 1988 passed by the Customs, Excise & Gold (Control) Appellate Tribunal, New Delhi (hereinafter referred to as the tribunal).

2. The appellant was at all relevant times engaged in the manufacture, inter alia, of polyester fibre (man-made) falling under tariff item 18 of the erstwhile Central Excise Tariff. In the manufacture of the aforesaid, the appellant was using, amongst other inputs, ethylene glycol and DMT (Dimethyl Tetraphthalate) duty paid ethylene glycol falling under tariff item No.68 of the erstwhile Central Excise Tariff received by the appellant and used in the manufacture.

3. The notification No. 201/79 dated 4-6-79, mentioned hereinafter, exempted, according to the appellant, all excisable goods on which duty of excise was leviable and in the manufacture of which any goods failing under tariff item 68 had been used, from so much of the duty of excise as was equivalent to the duty of excise paid on the inputs. The appellants claimed setoff of duty on ethylene glycol used in the manufacture of polyester fibre under notification No. 201/79 dt. 23-6-1979. In response to the appellants seeking setoff of the duty paid on ethylene glycol, they received a letter from the Assistant Collector of Central Excise, Ghaziabad, dated 6th August, 1980 by which the Asstt. Collector held that no pro forma credit was allowable in respect of ethylene glycol for the following :

(a) Methanol which is not excisable and is cleared without payment of duty; (b) Glycol residual waste which was being destroyed by the appellants by throwing in the field; and (c) Polyester fibre waste which was used in the recovery of DMT and exempt from payment of duty under Central Excise Notification dt. 19th May, 1976,

4. The appellants were further directed to furnish the exact percentage of ethylene glycol content used / consumed in the methanol, the ethylene glycol residual waste and polyester fibre waste; and that not to utilise the pro forma credit or set off credit till the date was furnished and the same was authenticated by the Chemical Engineer. The classification list submitted by the appellants was modified in terms of the said letter.

5. Thereafter, classification list was filed claiming setoff of duty on ethylene glycol failing under tariff item 68 under exemption notification No. 201/79 as amended by notification No.102/81 dt. 13th May, 1981. By this amended notification, a second proviso was added which provided that the credit of the duty allowed in respect of inputs could not be denied or varied on the ground that part of the input was contained in any waste, refuge or by-product arising during the manufacture, irrespective of the fact that such waste, refuse or by-produce was exempt from the whole of duty of excise leviable thereon or was chargeable to nil rate of duty.

6. Hence, it is the case of the appellants that from 11 th April, 1981 even though some part of the input may be contained in any waste, refuge or by-product which is chargeable to nil rate of duty, the credit of the duty paid on the inputs could not be denied. By his order the setoff of duty in respect of duty paid ethylene glycol was allowed from 11th April, 1981 onwards except in the case of ethylene glycol used/ consumed in polyester Waste used for recovery of DMT on the ground that this polyester waste was chargeable to nil rate of duty. Similarly, duty paid on ethylene glycol which was used for recovery of DMT was held not to be allowable while paying duty on polyester fibre.

7. Aggrieved thereby, an appeal against the said order to the Collector of Central Excise, Ghaziabad was filed.

8. The main contentions of the appellants .were that the ethylene glycon received in the factory after payment of duty was consumed in the manufacture of polyester fibre only. During the course of m