COMMISSIONER OF CENTRAL EXCISE Vs. AARTI INTERNATIONAL LTD.

JUDGEMENT

(1.) The issue involved in this Appeal, preferred by Revenue is whether benefit of Notification No. 1/95 - C.E. is to be denied in respect of inputs which have been used in the manufacture of cotton waste arising during the course of manufacture of cotton yarn. Shri Virag Gupta, Departmental Representative submitted that M/s. Aarti International Ltd., a 100% Export Oriented Undertaking manufacture cotton yarn and cotton waste; that they had procured inputs namely HSD and Lubricants at nil rate of duty under Notification No. 1/95 -C.E., dated 4 -1 -95; that these inputs had been used in the manufacture of cotton yarn as well as cotton waste; that Proviso to Para 5 of Notification No. 1/95 -C.E. provides that where articles including rejects, waste and scrap material are not excisable, excise duty equal in amount to that leviable on the inputs obtained under the Notification and used for the purpose of manufacture of such articles shall be payable at the time of clearance of such articles; that excisable goods means goods specified in the Schedule to the Central Excise Tariff Act and subject to duty of excise; that for being excisable the goods have, therefore to be specified in the Tariff Act and have to be subjected to a duty of excise; that as cotton waste is not subjected to duty of excise since no duty is chargeable as per Central Excise Tariff, it is not an excisable article; that, therefore, cotton waste falls within the ambit of non -excisable goods and the duty is payable.

(2.) Opposing the Appeal Shri R. Santhanam, learned Advocate, submitted that cotton waste is specifically mentioned in Heading No. 52.02 of the Schedule to the Central Excise Tariff Act and the rate of duty mentioned in the Tariff is nil; that accordingly it cannot be claimed by the Revenue that the cotton waste is non -excisable goods as defined in Section 2(d) of the Central Excise Act. He also relied upon the decision of the Supreme Court in the case of CCE, Hyderabad v. Vazir Sultan Tobacco Co. - 1996 (83) E.L.T. 3 (S.C.); wherein it has been held that excisable goods do not become non -excisable merely by reason that such goods are exempt from payment of duty.

(3.) We have considered the submissions of both the sides. According to Second Proviso to Para 5 of Notification No. 1/95 -C.E., dated 4 -1 -95 excise duty has to be paid on the articles included rejects waste and scrap material if they are not excisable goods. 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 as being subjected to duty of excise and includes salt. Cotton waste is specifically covered by Heading 52.02 and presently the rate of duty mentioned in the First Schedule to the Central Excise Tariff Act is nil. It is, there fore, apparent that cotton waste is an excisable goods as it finds mention in the First Schedule to the Central Excise Tariff Act and is subjected to duty which is presently 'nil'. It has been held by the Supreme Court in the case of Vazir Sultan Tobacco Company Ltd. that excisable goods do not become non -excisable goods merely because of the exemption given under the Notification. As the cotton waste is excisable goods, Second Proviso to Notification No. 1/95 -C.E. is not attracted. Accordingly, we reject the Appeal filed by the Revenue.