V.K. Agrawal, Member (T) - (1.)IN these 4 appeals filed by M/s. Matsushita Lakhanpal Battery (I) Ltd., arising out of a common Order -in -Appeal, the issue involved is regarding availability of exemption under Notification No. 67/95 in respect of inputs used in the manufacture of rejected batteries.
(2.)SHRI Ashutosh Upadhyay, learned Advocate, submitted that the Appellants manufacture Primary Cells and Primary Batteries - - Dry Battery cells and intermediate products of Dry Battery cells; that the components manufactured by them are captively used in the manufacture of dutiable final product Dry Battery cells and they claim exemption under Notification No. 67/95 -CE dated 16.3.95; that during the course of manufacture of Dry Battery Cells, a very small percentage of rejected/damaged Dry Battery cells is weeded out as waste and scrap; that the Asst. Commissioner, Central Excise under 4 Orders -in -Original confirmed the demand of duty and imposed penalty on the ground that the benefit of Notification No. 67/95 is not available as the rejected Dry Battery cells are not marketable and no duty is payable on them; that the Commissioner (Appeals) also, under the impugned Order, has rejected their appeals holding that the waste and scrap of Dry Battery cells is not excisable as held by the Tribunal in the case of Union Carbide (India) Ltd. v. CCE, Chennai, 2002 (139) ELT 679 (T). The learned Advocate, further, submitted that no industry is set up to produce non -marketable goods just to avail duty exemption; that the rejected/damaged Dry Battery cells cannot be termed as other product as it is a waste generated in the course of manufacture of Dry Battery cells; that thus it is a process based and as such the benefit of exemption under Notification No. 67/95 cannot be denied to them. He relied upon the decision in the case of Hindustan Petroleum Corporation Ltd. v. CCE, Hyderabad, 2000 (68) ECC 346 (T) : 2000 (124) ELT 323 (T) wherein it has been held that exemption from payment of duty under Notification No. 217/86 -CE is not to be denied merely because Naptha is also used to produce electricity which is non -excisable.
(3.)COUNTERING the arguments Shri Vikas Kumar, learned SDR, submitted that Notification No. 67/95 -CE exempts inputs manufactured in a factory and used within the factory of production in or in relation to the manufacture of final products specified in the table annexed to the notification; that column 3 of the table refers to all goods falling under the first Schedule to the Central Excise Tariff Act other than some specified goods; that the rejected Dry Battery cells are not falling under the first Schedule to the Central Excise Tariff Act and as such the components which have been used in or in relation to the manufacture of such rejected Dry Battery cells, the benefit of Notification No. 67/95 cannot be extended; that the Tribunal held in the case of Union Carbide (I) Ltd. (supra) that the waste of Dry Battery cells cannot be classified under Heading 79.02/79.03 of the Tariff and the Revenue has not pointed out any Tariff Heading under which the waste and scrap is covered in the Tariff; that the Tribunal has further held that as per Section 2(d) of the Central Excise Act excisable goods means goods specified in the first Schedule and the second Schedule to the Central Excise Tariff Act as being subjected to duty of Excise and in absence of any heading covering waste and scrap of Dry Battery cells, the same is not excisable. The learned SDR emphasized that once the Tribunal has held that the waste and scrap does not find mention in the Schedule to the Central Excise Tariff Act the Appellants cannot claim that they are captively consuming the components in the manufacture of goods falling under the first Schedule to the Central Excise Tariff Act and consequently the exemption under Notification No. 67/95 will not be available. He also pointed out that unlike Modvat Rules which contains Rule 57D there is no provisions in Notification No. 67/95. Finally he mentioned that rejected Batteries are exempted from payment of duty and proviso to Notification No. 67/95 will also apply which provides that the exemption will not be available if the goods are used in the manufacture of exempted products.
We have considered the submissions of both the sides. It is not disputed by the Revenue the the Appellants are engaged in the manufacture of Dry Battery Cells and they are also manufacturing components of such Dry Battery Cells. These components are vised captively by the Appellants in the manufacture of Dry Battery Cells. The components after being manufactured are used by the Appellants in the manufacture of Dry Battery Cells which are dutiable as well as specified in column 3 of the Table below Notification No. 67/95 CE. The benefit of notification is available to the goods manufactured in a factory and used within the factory of production in or in relation to the manufacture of final product specified in column 3 of the table. The components, after being manufactured by Appellants, are used by them within the factory of production in or in relation to the manufacture of Dry Battery cells which is specified in column 3 of the table. Thus, the benefit of exemption notification is available to the Appellants. The mere fact that during the process of manufacture of Dry Battery Cells which is specified in column 3 of the table, certain Dry Battery Cells are being rejected on account of numerous reasons will not mean that the goods have not been captively consumed in or in relation to the manufacture of final products specified in column 3 of the table. The decision in the case of Union Carbide was dealing with the excisability of the waste and scrap of Dry Battery Cells wherein it has been held that waste and scrap has not been specified in any of the heading of Central Excise Tariff and is not excisable. That decision is not applicable for the purpose of determining the eligibility of the Appellants in respect of components manufactured and captively consumed by them as their final product is not waste and scrap but Dry Battery Cell. Similarly, the proviso to Notification No. 67/95 will also not be applicable as the final product Dry Battery Cells are chargeable to Central Excise duty and are not exempt from payment of whole of the duty. Accordingly we set aside the impugned Order and allow all the appeals.