Decided on July 12,1991



K.S. Venkataramani, Member (T) - (1.) THIS appeal is directed against the Order dated 12 -3
(2.) 1990 passed by the Collector of Customs (Appeals), Bombay. The facts in brief are that the respondents are manufacturing Combs and Brushes out of imported cellulose acetate sheets in the Kandla Free Trade Zone. They are required to export minimum of 50% by weight of the product and the balance quantity of Cellulose Acetate Scrap is allowed to be cleared for Home Consumption on payment of duty after allowing 2% manufacturing loss. The respondents were required to pay additional duty of customs (CVD) on the Cellulose Acetate Scrap apart from customs duty by the order of the Assistant Collector of Customs, Kandla Free Trade Zone dated 22 -6 -1989. This came about because of the following circumstances : - The respondents were importing cellulose acetate scrap sheets claiming exemption under Notification No. 77/80, dated 17 -4 -1980. In this Notification Para 2(a)(ii) provides for clearance of scrap or waste material arising in the course of production within the Zone to any place outside the Zone on payment of duty equal to that leviable on the goods, if, imported in that form. The respondents cleared under the said provision two consignments of scraps 12 MT and 2 MT under two Bills of Entry dated 3 -7 -1985 and 29 -7 -1985 which were assessed duty and paid by the party. Subsequently, it was observed by the Department that the benefit of Notification No. 16/83 had been erroneously extended to the respondents resulting in short levy amounting to Rs. 60,480/ - and Rs. 8,870/ - in the two Bills of Entry. Notification No. 16/83 is for exempting basic excise duty on scrap or waste material of imported goods arising in the Kandla Free Trade Zone. The notification says that the Central Govt. exempts such scraps from the whole of duty of excise leviable thereon under Section 3 of the Central Excises and Salt Act, 1944 provided that such scrap is out of goods brought into the Free Trade Zone from outside India and provided such scrap is cleared for home consumption outside Zone on payment of duties of custom leviable thereon. The Assistant Collector held that Central Excise duty as a measure of additional customs duty ought to have been levied and collected on the scrap when it was cleared for home consumption. He, therefore, confirmed the demand. The Collector (Appeals), however, allowed the appeal against the Assistant Collector's order. The Collector found that Central Excise duty on the goods is exempted under Notification No. 16/83. He also observed that additional duty charged under Section 3 of the Customs Tariff Act is not leviable in this case as the Central Excise duty is exempted and that since the respondents had paid the duties of customs on the scrap, the benefit of exemption Notification 16/83 has rightly been extended to them. He, therefore, allowed the appeal against which the Collector of Customs, Kandla has preferred the present appeal.
(3.) THE learned Senior Departmental Representative Shri S.K. Roy appearing for the Appellant Collector drew attention to the grounds of appeal and submitted that the exemption Notification 16/83 applies only where the goods discharged their duty liability by paying duties of customs, additional duty of customs equivalent to central excise duty is part and parcel of the duties of customs. Since this additional duty of Customs had not been paid on the scrap cleared for home consumption, the second condition in the Notification 16/83 is not satisfied. Therefore, the demand of short levy duty from the respondent is correct in law. Shri Arun Mehta, the learned Counsel appearing for the respondent contended that the Collector (Appeals) had rightly interpretated the provisions of Notification 16/83 which is an exemption Notification under central excise and it will be incongruous to charge central excise duty as additional duty of customs on the scrap when there was exemption Notification No. 26/79 -Cus., dated 31 -1 -1979 on the customs side which exempts cellulose acetate sheets and strips falling under Chapter 39 of the Customs Tariff Act, 1975 from duty in excess of 75% and also from the whole of the additional duty of customs leviable thereon. We have carefully considered the submissions made by the learned Senior Departmental Representative and the learned Counsel. The Notification No. 16/83 -C.E., dated 11 -2 -1983 is as follows : - "Basic excise duty exempted on scrap or waste material of imported goods arising in the Kandla Free Trade Zone. In exercise of the powers conferred by sub -rule (1) of rule 8 of the Central Excise Rules, 1944, the Central Government hereby exempts scrap or waste material arising in the course of production or manufacture of any goods in the Kandla Free Trade Zone, from the whole of the duty of excise leviable thereon under section 3 of the Central Excises and Salt Act, 1944 (1 of 1944): Provided that : - (a) such scrap or waste material is out of any goods brought into the said zone from a place outside India; and (b) such scrap or waste material is cleared for home consumption outside the said zone on payment of duties of customs leviable thereon under any law for the time being in force." It is a Notification issued under Rule 8(1) of the Central Excise Rules. The demand for short levy duty in this case is based on the reasoning that this exemption notification is not available for the purposes of levy and collection of additional duty of customs (CVD). However, it is now well settled that a notification issued under Central Excise Rule 8(1) exempting indigenously manufactured goods from payment of excise duty wholly or partly does have the effect, and serves the purpose of exempting like goods imported into India from payment of additional duty of customs. This is the ratio of the judgment of the Madras High Court in the case of M.R.F. Limited v. Union of India and Ors., reported in 1987 (32) E.L.T. 465 (Mad.) and also of the Tribunal decision in the case of Collector of Customs, Madras v. Carborundum Universal, reported in 1988 (34) E.L.T. 300 (Tribunal). This has further been followed by this Tribunal in the case of Ranbaxy Laboratories Ltd. v. Collector of Customs, reported in 1990 (47) E.L.T. 576 (Tribunal). Therefore, the conclusions of the Collector (Appeals) about the availability of exemption under Notification No. 16/83 -C.E. to the waste/scrap cleared for home consumption by the respondents herein is well founded, and in this view of the matter, we see no reasons to interfere with his order. The appeal is accordingly rejected. ;

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