important point
The adjudicating authority should appropriately analyze the factual scenario before arriving at a conclusion.

judgment

Dr. Arijit Pasayat, J. —

1.Challenge in this appeal is to the order passed by the Customs Excise and Gold (Control) Appellate Tribunal, New Delhi (in short the CEGAT). By the impugned judgment dated 28.11.2001 CEGAT allowed the appeal filed by the respondent holding that waste/scrap/parings of paper board which are generated during the process of manufacture of paper and paper board is nothing new, distinct in name, character and use for the purpose of levy of duty. Therefore, it was held that no duty was chargeable.

2.Background facts in a nutshell are as follows :

“During investigationof the accounts of M/s Wimco Ltd. Bareilly, it transpired that the respondent was using paper and paper board for the manufacture of printed paper board boxes. During the course of manufacture of such boxes, waste/scrap/parings are generated, it was alleged that this waste was classifiable under Chapter sub-heading 4702.90 of Central Excise Tariff Act, 1985 (in short the Tariff Act). Scrutiny of records revealed that the respondent was selling this waste/scrap/parings. It was also noticed that they did not declare transactions of waste/scrap/parings, and did not file classification list under Rule 173-B of the Central Excise Rules, 1944 (in short the Rules) and did not issue any invoices prescribed under Rule 52-A. Accordingly, a show cause notice (in short SCN) was issued to the respondent asking it to explain as to why duty amounting to Rs.23,20,000/- should not be demanded and why penalty should not be imposed and why interest should not be charged. In reply to the SCN, the respondent submitted that scrap is generated at two stages; that it arises before the manufacturing operation starts; that the demand of duty on the quantity of scrap which is generated during the pre-manufacturing operations cannot be sustained; that the scrap is not a result of manufacturing process; that the word manufacture is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some changes in a substance; that manufacturing implies a change; that every change in an article is the result of treatment; that every treatment is not manufacture as something more is necessary; that there must be transformation and a new different article must emerge having a distinctive name, character and use. It was submitted that in their case, generation of scrap was not manufacture.

It was also submitted that longer period is invokable and substantial part of the demand was beyond a period of six months; there was no evidence of any suppression or mis-statement; there was a bona fide belief that waste generated in the process of manufacture of match boxes was not dutiable as it arose out of duty paid paper and card board.

Commissioner of Central Excise confirmed the payment of duty amounting to Rs. 23,20,000/- imposed penalty of identical amount and also directed payment of interest at the appropriate rate under Section 11 AB of the Central Excise Act, 1944 (in short the Act).”

3.The stand of the respondent before the CEGAT was that there was no manufacture inasmuch as whatever is used is paper and paper board and whatever is generated as waste/scrap/parings is generated out of duty paid paper and paper board and a new different article must emerge having a distinctive name, character and use to constitute manufacture. It was submitted that in their case, generation of scrap was not manufacture and hence not dutiable. In essence, it was submitted that since duty paid paper and paper board was used by it, duty cannot be demanded again on waste/scrap/parings which are nothing but paper and paper board.

4.It was also submitted that if Departments stand is accepted, assessee would be entitled to modvat credit. Such credit available on paper and paper board would be much higher than duty payable on waste/scrap/parings.

5.The stand of revenue on the other hand was that what is generated is waste/scrap/paring and there i