1. Appela No. 446/84 has been filed by the Collector of Centra Excise Indore, against ther Order in-Original No. V (18-II) 18-3/81/3410-13 dated 4-4-81 passed by the Assistant Collector of Central Excise, Ujjain. Appela No. 364/84 is against the same Prder-in-original preferred by the party. Appeal No. 364/84 is against the Order-in-original No. C. No. V (18-IV) 18-9/81/3451 dated 24-4-82, also preferred by the party. As common questions of law and facts are involved in all the appeals, they were heard together. The orders-in-appeal were confirmed by the Appellate Collector vide his order No. 305-306 CE/IND/83 dated 25-11-83. The appellants in 363/84 and 364/84 are referred to as appellants in respect of all these appeals." 2. The appellants Company manufacture Nylon and polyester filament yarn. These products are manufactured in a sophisticated plant in an integrated process of manufacture. The end products, namely, polyester and nylon filament yarn appear only after being drawn or stretched in the Draw Twisting/Texturising Department, During this activity, various sorts of waste arise at different stages of the production. The appellants contend that an amendment was made and a new sub-item by way of 18(IV) was introduced in 1978, covering non-cellulosic wastes, all sorts 'in' or 'in relation to' the manufacture of man-made films and man-made filament yarns. The appellants have filed a Process Flow Chart. The appellants contend that any waste obtained before the stage of stretching known as unstretched/undrawn waste cannot be treated as waste 'of yarn' as determined and classified by the Department. The appeal No. 363/84 covers the period 1-4-78 to 31-1-81. The appellants have filed the appeal for refund of Rs. 13,50,111.97. The appeal 364/84 covers the period 1-2-81 to 31-3-81 and a refund of duty of Rs. 1,08,301.01 is prayed for. According to the appellants, the term 'only' would indicate that all wastes arising in, or in relation to, the manufacture of man-made fibres and yarn cannot be included and only that waste arising on or after the stage, where the yarn attains its identity, it should be charged to duty. The appellants have paid the duty and filed the refund applications which were dismissed. An appeal was filed before the Appellate Collector, Central Excise, New Delhi, who held that all wastes arising up to the stage of polymer chips cannot be covered by Entry 18(1V). Waste after the chip stage and upto the stretching stage were held to be waste as contemplated by Tariff Entry 18(1V). Hence the appeals.
3. The Department has filed ED(SB) 446/84 questioning the order of the Appellate Collector, Central Excise, New Delhi, and seek a restoration of the order of the Assistant Collector. According to the department, the raw material namely, caprolactum and DMT is fed in a continuous process, chips are formed, which, through an electrically heated extrusion process are drawn through spinnerettes. It is further stretched in the stretching Section for manufacture of finished goods.
4. Shri S.N. Kohli stated that the chips are known as such in the market. According to the Chart, Waste Location in Process Flow, caprolactum is fed in the melter. It passes through poly-column, quench trough, cutter, extraction and dryer stages. The chips are formed and are stored in the storage tank. Wastes arise at the poly-column stage, lump waste, quench trough waste, etc. at the several stages. The items are located as 1 to 7 in the Chart. We now come to the second part of the production. The chips are fed into the Extruder and, thereafter passing through the stage of spinning, take-up winding, draw twisting, laboratory up-twisting and rewinding, it reaches the packing stage. At the spinning stage, spinning lump and spinning undrawn waste accrue.
Later, undrawn waste, draw yarn waste, undrawn/drawn waste and drawn waste arise at the subsequent stages. These are indicated as Items 8 to 14 in the Waste Location in Process Flow Chart. According to Shri Kohli, the characteristics of yarn are assumed, only from stage 11 (draw- twisting stage) when the stretching stage starts, and that waste accruing there- from alone is liable to duty. It must be, pointed out that the Assistant Collector held that waste arising right from stage 1 (caprolactum feed) and culminating with the packing would all be liable to duty. The Appellate Collector held that waste arising from stage 8 (i.e. Extruder) alone would attract duty. The learned counsel stated that before 1975, undrawn waste was not taxed, as it was not treated as yarn. The counsel said that till the stage of drawing, the characteristics of yarn were not acquired and hence they were not made liable to duty. He filed before us Pune Trade Notice No. 63/75 dated 2-5-75. This Trade Notice refers to polymer (nylon filament yarn). It is stated therein as follows :- "It is only after stretching that the product gets the essential riteria of yarn and can be treated as yarn falling under CET Item 18. Accordingly, any waste which arises upto the stage of stretching cannot be treated as yarn waste which arises after the stretching i.e. in rolling, canning, etc. of the yarn after stretching is a waste of nylon yarn falling under Item No. 18 and will be assessed to the Central Excise Duty." This Trade Notice was subsequently reiterated by the Central Board of Excise & Customs vide Tariff Advice No. 21/77 dated 31-3-1977, which reads as follows :- "Undrawn waste whether of Nylon or Polyester arising upto the stage of stretching cannot be treated as yarn waste and will not therefore attract duty under T.I. No. 18. Further such undrawn waste of Polyester or Nylon will not also be liable to duty under T.I. No. 15A and would correctly be classified under T.I. 68. But fibre made out of undrawn waste by garnetting and carding would be liable to duty under Item 68." 5. The learned counsel, therefore, urged that Item 18(IV) was added in 1978 by way of amendment to have legislative sanction for the duty already collected on the basis of the earlier Trade Notices/Advices. He also argued that under Item 18(IV), any waste, which is not a waste of yarn, could not be taxed. The entry contemplates tax on the product covered under Item 18, which almost approximated to yarn or fibre and is, therefore, yarn or fibre. He relied on 1980 ELT p. 146 (Indian Aluminium Co. Ltd. and Anr. v. A.K. Bandyo-padhyay and Ors.). Following 1977 ELT (p. J 199) it was held that "goods must be something which can ordinarily come to the market and be bought and sold and that the 'manufacture' which is liable to Excise duty under the Central Excises and Salt Act, 1944, must therefore be bringing into existence of a new substance known to the market." He urged that Tariff Item 27 has approved the ratio of this decision. According to him, Parliament cannot tax a product which is not taxable under Section 3 of the Central Excises and Salt Act, 1944. He explained that by introduction of Item 18(IV), Parliament did not choose to do it and this entry has to be read in the light of the general law relating to principles of taxation. The learned counsel, therefore, submitted that waste arising on and from the stage of stretching (stage No. 11) alone would be liable for duty.
6. Shri K.C. Sachar, JDR, argued that the entire process was uninterrupted and integrated. He stated that the waste arising at all the intermediary stages are being put to use or could be used for re-cycling. He pointed out that no distinction can be drawn between pre-drawn and post-drawn wastes. He drew our attention to the manufacturing process and argued that once DMT caprolactum is melted, the process was carried on in closed pipe lines and thus waste arising at any of the intermediary stages would be waste in or in relation to yarn, and would therefore be liable to duty.
7. The heading of Tariff Item 18 reads "Man-made fibres, filament yarns and cellulosic spun yarn". The heading is split up into 4 separate Sub- headings. Item 18(IV) reads as "Non-cellulosic" wastes, all sorts. The explanation below this item reads as follows : "This item includes only waste arising in, or in relation to, the manufacture of man-made fibres (other than mineral fibres) and man-made filament yarn." 8. The explanation refers to only waste arising in or in relation to the manufacture of man-made filament yarn and fibres. The learned counsel wants to construe this explanation as denoting that waste arising on and from the stage when the manufactured product would be known as "yarn" alone would attract duty. According to the Department, since it is a continuous process, waste arising at any stage would be liable to duty. The Waste Location in Process Flow Chart indicates the several stages where the waste accrues. Upto the stage of chips, we find that wastes do occur. But the waste accruing up to that stage cannot be considered as waste "in or in relation to the manufacture of yarn". As rightly held by the Collector (Appeals), polymer chips are a separate commodity well-known to the market as well excisable separately in the Central Excise Tariff. All wastes arising up to that stage would not be waste arising "in" or "in relation to" manufacture of yarn, but would be waste arising in the manufacture of polymer chips. The Tariff Entry does not indicate that all the wastes, irrespective of the nature of the industry, would attract duty. Hence, in our view, the Collector (Appeals) rightly held that waste accruing up to the stage of the manufacture of polymer chips would not attract duty under item 18(1V).
9. We have to consider the waste arising after that stage. The learned counsel for the appellants argued that the product assumes the characteristics of yarn only from the stage of stretching. We do not accept this contention in regard to waste. The Entry reads "in or in relation to the manufacture of yarn". The Process Chart shows that the polymer chips are fed to the Extruder and, after the process of spinning and winding, they come to the draw-twisting stage. The molten material is extruded through spinnerettes. To quote from the manufacturing process (details submitted by the appellants):- "The melt coming out of spinnerettes is in the form of filament and this filament is cooled by quenched air. Here Troysan is added to prevent the finished product from bacteria. The cooled (undrawn) filaments are taken up to take-up machines on bobbings/tubes." "Take-up bobbings/tubes are taken to DT/Dtx machines where the undrawn filaments are stretched/texturised in order to get the required properties of the yarn." The above narration shows that from the stage the molten material is extruded, the process of manufacture of yarn commences. Hence waste arising there- after would be waste in or in relation to the manufacture of man-made filament yarn. We do not accept the contention of the learned counsel of the appellants that the Parliament has excluded the waste arising at the stages earlier to stretching. The Trade Notices issued prior to the amendment of the Tariff Entry are not relevant to the issue, because we are to assess the dutiability of the item as the basis of the Tariff Entry. Shri S.N. Kohli very fairly conceded that the vires of the Entry cannot be challenged before the Tribunal. The Board's rulling in 1982 ELT p. 196 has also no bearing in view of the amendment to the Tariff Entry. A close reading of the Tariff Entry 18(IV), taken together with the Explanation, leads us to conclude, that waste arising in or in relation to the manufacture of man-made filament. yarn, even though they may be in intermediary stages, are liable to duty under that Entry. The Departmental pleas in respect of the waste arising prior to the stage of manufacture of polymer chips has rightly been disallowed by the Collector (Appeals).
Hence we hold that the order passed by the Collector (Appeals) rejecting the prayer for refund by the appellants is justified and does not call for any interference. In the result Appeal Nos. 364/84 and 363/84 filed by the appellants (Ms. Shree Synthetics Ltd.) are dismissed. The appeal filed by the department in ED (SB) 446/84 is also dismissed.