Ashutosh Mohunta, J. - (1.) THE Revenue has filed the present reference petition against the order of the Custom, Excise and Gold (Control) Appellate Tribunal (for short, 'the CEGAT') dated October 17,2000 vide which the appeal of the Revenue was dismissed.
(2.) BRIEFLY , the facts are that the respondent -M/s. Swaraj Automotives Ltd., Nabha, is engaged in the manufacture of PU Foam falling under Chapter sub -heading No. 3926.10 of the Central Excise Tariff Act, 1985. The foam so manufactured by the respondent is further used in the manufacture of seats. The PU Foam articles were cleared by the respondent after trimming them. As a result of the trimming, waste and scrap arose. At the time of clearance of the PU Foam articles, the respondent included the weight of the waste and scrap and paid duty on the actual weight of the PU Foam. This included the weight of the waste and scrap also. Thus, the Excise Duty was paid on the PU Foam without deducting the weight of the waste and scrap. The respondent claimed Modvat credit, which was utilised in the payment of duty on the seats. The Modvat credit claimed by the respondent was partly disallowed by the Additional Commissioner vide order dated November 3,1998. As a result of the reduction of the Modvat credit, the respondent was directed to pay an amount of Rs. 2,13,424.17. A penalty of Rs. 25,000/ - was also imposed. The respondent filed an appeal before the Commissioner (Appeals), Central Excise & Customs, Chandigarh, who vide order dated January 20, 2000 allowed the appeal and set aside the order of the adjudicating authority. It was held that "there does exist technical necessity for keeping the protruding fringes etc. as it is, till manufacture of seats for help in stitching......" It was further held that the onus was on the Department to prove that the scrap and waste arose at a stage when the articles of PU Foam were manufactured. In the opinion of the Commissioner', Central Excise, the Revenue had failed to discharge the onus, as no documentary evidence was produced by it. Thus, as there was no sufficient evidence produced by the Revenue, the appeal was allowed in favour of the assessee. The Revenue filed an appeal before the CEGAT, which also was dismissed vide order dated October 17,2000. Hence, the present reference petition.
(3.) THE Revenue has claimed that the following questions of law arise in the present case : - "(i) Whether the learned Tribunal was correct in holding that the waste arises in the manufacture of seats and not in the manufacture of PU Foam articles in view of the evidence cited by the petitioner ? (ii) Whether the learned Tribunal was correct in holding that there is no revenue implication in the procedure followed by respondent No. 1 when the waste is not an input, in terms of Rule 57A of the Central Excise Rules, 1944 for use in the manufacture of seats and any duty paid on waste cannot be utilized as credit for payment of duty on the seats -;