Jyoti Balasundaram, Member (J)

1. The issue for determination in this appeal is whether the caprolactum recovered from nylon polymer waste by the process of depolymerisation is exempt from payment of excise duty by virtue of Notification 36/85-C.E., dated 17-3-1985 which exempts such Caprolactum recovered by the process of recycling.

2. The appellants manufacture among other goods, nylon yarn and from the nylon polymer waste, recover caprolactum by depolymerisation. Exemption was granted to such Caprolactum vide Notification 18/84 dated 1-3-1984 and Notification 36/85 dated 17-3-1985.

3. The order challenged in the appeal held that depolymerisation process is different from recycling process and therefore the caprolactum recovered by depolymerising nylon polymer waste is not entitled to the benefit of the exemption notifications and levied duty of Rs. 20,78,601.30 and imposed a penalty of Rs. 5 lakhs.

4. We have heard Shri R. Santhanam for the appellant and Smt. Zutshi for the respondent.

5. The first contention put forth by the appellants is that the demand for duty for the period December 1984 to February 1986 is barred by limitation as the show cause notice was issued on 14-1-1987, well beyond the period of 6 months. According to them, there was no suppression as they had filed classification lists, and therefore there was no justification for invoking the extended period of limitation of 5 years. The next contention is that the Collector had misconstrued a jurisdictional fact inasmuch as he has not referred to the Assistant Collector's order of 19-1-1987, granting partial benefit to waste arising prior to the stage of manufacture of yarn (and denying it to waste arising at a subsequent stage). According to the appellants, the change of opinion by the Department that depolymerisation is distinct from recycling can only operate prospectively and not retrospectively. Reliance is placed on the case of Raza Textiles v. Union of India (MANU/SC/0333/1972 : 1973 87 ITR 539).

The third submission of the appellants is that caprolactum in liquid form is not goods, it is not bought and sold anywhere, and it is not capable of being bought and sold and therefore does not attract duty as held in the cases of Jayant Oil Mills [MANU/SC/0111/1989 : 1989 (40) E.L.T. 287], C.C.E. v. Eastend Papers [MANU/SC/0107/1989 : 1989 (43) E.L.T. 201], C.C.E. v. Ambalal Sarabhai Enterprises [MANU/SC/0012/1990 : 1989 (43) E.L.T. 214] and Bhor Industries [MANU/SC/0073/1989 : 1989 (40) E.L.T. 280]. The appellants also contend that having paid customs duty on imported caprolactum, demand of excise duty on the same caprolactum recovered by recycling would amount to double taxation of the same goods.

6. Shri R. Santhanam takes us through the annexures to the show cause notice relating to quantity of waste and quantity of recovered caprolactum and argues that it is impossible to tally and co-relate these figures. He also argues that the basis of price fixation for caprolactum at Rs. 29,000/- per metric tonne is erroneous as this price is the sale price of Gujarat State Fertiliser Corporation which is not the price at which the appellants imported the goods. Shri Santhanam draws our attention to the definition of "Polymerisation" and "depolymerisation" in Words and Phrases Permanent Edition Vol. 12 and Vol. 33. Regarding the charge of non-filing of ground plan, he submits that it was filed, though belatedly (in August 1985, after trial runs). In conclusion, he submits that the penalty imposed is unwarranted.

7. In reply, Smt. Zutshi begins by explaining the meaning of monomer, polymer, polymerisation and depolymerisation. Caprolactum is a monomer which is polymerised to make nylon 6 chips (the figure 6 refers to the number of cartons) which are then washed with hot water to remove oligomers and monomer. Different types of waste arise at different stages and at the first stage, nylon polymer waste (synthetic filament waste) arises. According to Hawley's Condensed Ch