D.C.L. POLYSTER LTD., NAGPUR versus COLLECTOR OF CENTRAL EXCISE AND CUSTOMS

Citation: [2005] 2 S.C.R. 279 · Decided: 22-02-2005 · Supreme Court of India · Bench: ARIJIT PASAYAT · Disposal: Dismissed
Open in Lexace · Ask the AI about this case
Judgment (excerpt)

D.C.L. POL YSTER LTD., NAGPUR 
A 
v. 
COLLECTOR OF CENTRAL EXCISE AND CUSTOMS 
FEBRUARY 22, 2005 
[ARIJIT PASA Y AT AND S.H. KAPADIA, JJ.] 
B 
Central Excise Act, 1944/Central Excise Tariff Act, 1985-Section l lAI 
Chapter Heading 39.15 and 39. 07-Excise duty-Levy of-On polyester chips 
spilled over during process of bagging-Classification of the product by C 
assessee under heading 39.15 as sweeping waste incurring 'nil' duty-Demand 
of duty by Revenue classifoing it under heading 39.07 invoking extended 
period of limitation-Revenue and the Tribunal held the product classifiable 
under heading 39.07-0n appeal, held : The spilled chips are classifiable 
under Chapter Heading 39.07-It cannot be said to be waste during 
manufacturing process-The chips by spillage did not cease to be chips by D 
dust contamination-Revenue could invoke extended period of limitation as 
the assessee in the classification list had not specified the stages of production 
and the manner the wastes had emerged-Central Excise Rules, 1944-Ru/es. 
9, 49, 52A and 276. 
Appellant-assessee was manufacturer of partially oriented yarn of 
polyester and polyester chips. During one of the stages of manufacture 
E 
i.e. bagging, some 'chips' fell off and were collected. For the purpose of 
assessment, the assessee had termed the spilled chips as "sweeping wastes" 
classifiable as 'waste' under heading 39.15 of Central Excise Tariff Act, 
1985, incurring 'nil' duty. Revenue demanded duty on the spilled chips. F 
Revenue by invoking extended period of limitation also demanded duty, 
for clearance of polyester chips as 'waste' without cover of gate passes 
and in contravention of Rules 9, 49, 52A and 276 of Central Excise Rules, 
1944 with intention to evade payment of duty. The Adjudicating Authority 
confirmed the demand holding that the spilled chips were not 'waste' G 
classifiable under heading 39.15 as any contamination of the 'chips' after 
their manufacture will not change the nature of the product. It also 
rejected the claim of the assessee for benefit of 'nil' rate of duty under a 
notification dated 1.3.1992 on account of absence of evidence showing 
utilization of 'Chips' in the manufacture of Polyester Staple Fibre. In 
H 
279 
280 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A appeal, Customs, Excise and Gold (Control) Appellate Tribunal upheld 
the order passed by Adjudicating Authority. However, it remitted the 
matter to the Commissioner to decide as to whether the assessee had 
fulfilled all the conditions stipulated in _the Notification. 
In appeal to this Court the questions for _consideration were whether 
B the product termed by the assessee as "sweeping wastes"·was classifiable 
under Chapter Heading 39.J 5 (waste) or under Chapter Heading 39.07 
(Primary Form of plastic) of the Act; and whether the Department was 
right in invoking Section IJA(J)? 
c 
Dismissing the appeal, the Court 
HELD : J .1. In the present case, at the stage of spillage, the Polyester 
"chips" are not waste nor can they be said to be waste owing to the 
manufacturing process. This finding is pure technical finding and, 
therefore, no interference is called for Scope of an entry in the tariff is a 
D matter of law. However~ whether a product comes within an entry is a 
mixed question of law and fact. The fact that as per Central Excises Rules, 
1944, after completion of one stage of manufacture, entries were made in 
the R.G. Register, indicates that the chips were independent products 
which were required to be bagged and in that they spilled over as "chips". 
In the entire case, there is no evidence that such "chips" ceased to be 
E "chips". On the contrary, the invoices produced by the assessee show that 
the said "chips" were bought and sold as polyester chips in the market. 
Impurity in the chips is a relevant circumstance for valuation and not for 
classification, unless the contamination is so heavy that the nature of the 
product ceases to be polyester chips. In the present case, there is no 
F evidence that alleged unusable chips had ceased to be chips. 
G 
H 
(291-C;F; 291-G-H) 
Chemicals and Fibres India Ltd, v, Union of India and Ors., (1982) 
JO ELT 917 and Collector of Central Excise v. Nuchem Industries Pvt. Ltd., 
[1998( 9 sec 656, relied on. 
Collector of Central Excise v. Ambalal Sarabhai Enterprises, (1989) 43 
ELT 214; Moti Laminates Pvt. ltd. v. Collector of Central Excise, Ahmedabad, 
(J 995) 76 EL T 24l and Union of India v. Delhi Cloth & G
Excerpt shown. Read the full judgment & AI analysis in Lexace.