1. The appellants are aggrieved of rejection of their refund claim in respect of lap waste of yarn. The facts of the case are as follows.
Notification No. 172/72-C.E., dated 24-7-72 exempted waste yarn (hard waste) falling under item No. 18E of the Central Excise Tariff from the whole of the duty of excise leviable thereon. The notification contained an Explanation which specified the eligible types of waste yarn in relation to two categories of yarn-(1) yarn containing more than 40% of cotton and (2) yarn containing 40% or more by weight of wool. Under the first category of yarn, one of the eligible types of waste yarn specified was "yarn not exceeding three metres in length, in loom beam ends commonly known as 'lap waste' or Antri". It is not in dispute in the present appeal that the yarn manufactured by the appellants did not fall in the first category of yarn specified in the Explanation since their yarn contained less than 40% of cotton. The appellants stated during the hearing before us today that their claim for refund of duty on lap waste was under the substantive part of the notification and that they have referred to the Explanation just to show that lap waste arises during the weaving process and that it is a type of waste yarn. They initially paid duty on warp beams of yarn, used those beams in weaving of fabrics, collected the lap waste or remnant loom beam ends over a period of time and then asked for refund in respect of such lap waste in terms of the notification. The lower authorities rejected their claim on two counts-(1) the exemption from duty was available only if waste was obtained in the manufacture of yarn before payment of duty; waste arisen out of duty paid yarn used in the manufacture of fabrics could not be re-assessed to duty at nil rate because it was already duty paid and (2) the appellants had not been able to establish that the waste on which refund had been claimed had arisen out of yarn manufactured from April 1975 to December 1975 only since refund on the waste which had arisen prior to April 1975 was time-barred under Rule 11 of the Central Excise Rules, 1944.
2. The appellants' plea is that the first ground taken by the lower authorities nullified the purpose of the notification in so far as lap waste was concerned because by its very nature such waste could arise only after the duty paid yarn on warp beam had been used up in weaving of fabrics. Regarding the second ground they stated that the show cause notice issued to them prior to the rejection of their refund claim contained no allegation of their claim being time-barred.
3. The Department's representative stated that according to the provisions of Rule 9A, central excise duty was payable at the rate in force at the time of removal of the goods (1979 E.L.T. 258 : 1980 E.L.T. 709), that clearance of the goods for captive use was deemed as removal of the goods and that any waste arising after removal of the goods on payment of duty under the normal procedure was not entitled to refund under the notification. He added that the notification was not redundant in so far as lap waste is concerned because textile mills working under the compounded levy scheme and paying yarn duty on the basis of the area of the fabrics along with the fabric duty were capable of availing the concession. Regarding the question of time-bar, he stated that it was necessary for the appellants to establish for the purposes of Rule 11 as to when the duty, of which the refund was asked for, had been paid but the appellants had failed to do so. He stated finally that genuine lap waste could not be as high as 2 to 3% as claimed by the appellants.
4. Availing their right of reply, the appellants stated that they had furnished the particulars of duty payment on fresh yarn out of which waste yarn had arisen under item G of their refund application and that denial of the concession to them would mean discrimination against the mills using less than 40% of cotton.
5. We have carefully considered the matter. It is a settled proposition; of law that excise is a tax on manufacture and under the normal procedure it is payble at the time of removal of the goods, whether outside the factory or within the factory for captive use. The goods have to be assessed in the form they are presented for assessment at the time of their removal. What happens to the goods afterwards cannot affect the assessment already made, unless there is a specific provision in the case of yarn removed by the appellants under the normal procedure. What they presented for assessment were warp beams of yarn in sound condition. They paid duty thereon, then took them to their weaving department and consumed them in the manufacture of fabrics. There is no provision of law under which waste arising in the course of consumption, of duty paid yarn is entitled to refund of duty.
Notification No. 172/72-C.E. could, in the case of the appellants, apply only if they presented waste yarn (hard waste) for assessment and removal in terms of Rules 9 and 9A. But such, is not the case here.
What they presented for assessment and removal was goods yarn in the form of warp beams. Lap waste arising thereafter in their factory is not entitled to refund under the notification. In the case of the appellants, waste yarn arising in the course of spinning, reeling and warping etc. processes, i.e., pre-assessment processes, was entitled to exemption but not the waste arising in the weaving process after the assessment. The argument of discrimination put forth by them is not valid because the substantive part of the notification applied to all waste yarn falling under item 18E of the tariff irrespective of the fact whether the cotton content thereof was more than 40% or less than 40%. The appellants cannot complain of discrimination vis-a-vis the mills working under a different scheme of assessment (such as the compounded levy scheme). Without going into the aspect of time bar, we hold that on the substantive ground alone the appellants' claim is inadmissible. Accordingly, we reject this appeal.