NIRLON SYNTHETIC FIBRES AND CHEMICALS LTD. ETC. versus THE COLLECTOR OF GENERAL EXCISE

Citation: [1996] SUPP. 4 S.C.R. 614 · Decided: 13-08-1996 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
NIRLON SYNTHETIC FIBRES AND CHEMICALS LTD. ETC. 
v. 
THE COLLECTOR OF GENERAL EXCISE 
AUGUST 13, 1996 
B 
[S.P. BHARUCHA AND S.B. MAJMUDAR, JJ.] 
Central Excises and Salt Act, 1944 : Manufacture of 'Nylon 
yam'-'Caprolactam' subjected to Polymerisation-Recylillg of waste to 
recover caprolactam-Excise duty imposed Oil recovered caprolactam treatillg 
C the process of recyclillg as all illdepelldellt manufactwillg proces;-Held, 
recovered caprolactam is not liable to excise duty-Marketability of the product 
llOt established. 
The appellants were engaged in manufacturing nylon yarn using the 
D raw material caprolactam, which was subjected to polymerisation. The 
appellants recycled the waste poly- caprolactam obtained at various stages 
of the process of manufacture, to recover caprolactam. The Excise 
E 
F 
authorities, treating the process of recycling as an independent manufac-
turing process, imposed duty on it. The appellants' claim for refuud of duty 
was rejected. The Collector (Appeals) as well as the Customs, Excise and 
Gold (Control) Appellate Tribunal upheld the rejection. Hence the present 
appeal. 
The contention of the appellants was that the caprolactam that was 
recovered from the waste was in molten form and not a saleablr commodity. 
The appellants also contended that the Tribunal in two subsequent judg-
ments in Jagatjit Cotton* and L.M.L. Ltd.* had held that the caprolactam 
that was recovered from waste was not liable to excise duty. 
The contention of the Excise authorities was that since the product 
was mentioned in the schedule and it was used as raw material, it should 
G be assumed that it was marketable and the onus to rebut such assumption 
should rest on the appellants. 
Allowing the appeals, this Court 
HELD : 1.1. The caprolactam recovered from waste is not 
H marketable as such and hence not liable to excise duty. [618-F] 
614 
N~LONSYN1HE11CABRES CHEMICALS LID. v. COLLECTOR OF CENrRALEXCISE[BHARUCHA,J.J 615 
1.2. The Customs, Excise and Gold (Control) Appellate Tribunal in its A 
subsequent decisions in Jagatjit Cotton Textile Mills* and L.M.L. Ltd.* had 
very rightly recognised the importance of the marketability of the product 
for the purpose of levy of excise duty and had held that caprolactam that was 
recovered from waste was not liable to excise duty. [617-F] 
1.3. In the instant case, it was found as a fact that the recovered B 
caprolactam was not a saleable commodity upon the basis of the assessee's 
evidence and the failure of the Excise authorities to prove the contrary. The 
Excise authorities having made one attempt to disprove the evidence led by 
the assessees and establish by evidence of their own that the recovered 
caprolactam was marketable, there is no reason why they should now be C 
given a second opportunity to do so by an order of remand. [618-Q-E] 
*Jagatjit Cotton Textile Mills Ltd. v. Collector of Central Excise, (1990) 
50 E.L.T. 379 andL.M.L.. Ltd. v. Collector of Central Excise, (1998) 59 E.L.T. 
82, approved. 
D 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4173-74 
of 1984 Etc. 
From the Judgment and Order dated 12.10.83 of the Customs, Excise 
and Gold (Control) Appellate Tribunal,.New Delhi in A. Nos. ED (SB) 
(T) 1492 and 1490 of 1980-C (Order Nos. 309-10 of 1~83-C). 
E 
Ravinder Narain, Ms. Amrita Mitra and Rajan Narain for the Ap-
pellants. 
J. Vellapally, AS. Rao, P. Parameshwaran and R.P. Srivastava for 
the Respondents. 
F 
The Judgment of the Court was delivered by 
BHARUCHA, J. The appellants manufacture nylon yam using a raw 
material known as caprolactam. The raw material is subjected to 
polymerisation. This is a reversible process. After polymerisation the resul- G 
tant poly-caprolactam is spun to obtain nylon yarn. Waste in solid form 
containing poly-caprolactam is obtained at various stages of the process of 
manufacture. To fully use caprolactam, which is expensive and duty paid, 
the appellants have installed equipment by which caprolactam is recovered 
from the aforementioned waste and re-cycled into the process. The Excise 
authorities sought to treat the process of separation of caprolactam from H 
616 
SUPREME COURT REPORTS [1996) SUPP. 4 S.C.R. 
A the waste as an independent manufacturing process, and subjected it to 
duty. The claim of the appellants for refund of such duty was rejected. The 
Collector (appeals) upheld the rejection, as did the Customs, Excise & 
Gold (Control) Appellate Tribunal. Hence this appeal. 
B 

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