Arora Fibers Ltd  VERSUS  C.C.E. &  S.T.-Vapi

Customs, Excise & Service Tax 

Appellate Tribunal West Zonal

Bench At Ahmedabad

 

REGIONAL BENCH- COURT NO.3

Excise Appeal No. 900 of 2012 – DB

 

(Arising out of OIO-15-18-DEM-VAPI-2012 dated 31/08/2012 passed by Commissioner of Central Excise-VAPI)

 

Arora Fibers Ltd 

VERSUS 

C.C.E. & S.T.-Vapi

WITH

 

Excise Appeal No. 14101 of 2013 – DB

 

(Arising out of OIO-VAP-EXCUS-000-COM-046-13-14 dated 30/09/2013 passed by Commissioner of Central Excise, Customs and Service Tax-VAPI)

Arora Fibers Ltd Appellant

Survey No. 213, Govt. Industrial Estate, Phase-Ii, Piparia, Silvassa

Dadra & Nagar Haveli

VERSUS

 

C.C.E. & S.T.-Vapi ……Respondent

4th Floor…Adharsh Dham Building,

Opp. Town Police Station, Vapi-Daman Road, Vapi Vapi, Gujarat – 396191

APPEARANCE:

Shri Gervasis P. Thomas, Advocate appeared for the Appellant

Shri Prabhat K Rameshwaram, Additional Commissioner (AR) for the Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR HON’BLE MEMBER (TECHNICAL), MR. RAJU

 

 

Final Order No. A/ 11034 -11035 /2023

 

 

 

 

 

RAMESH NAIR

DATE OF HEARING: 02.12.2022 DATE OF DECISION: 03.04.2023

 

 

The issue involved in the present case is that whether the appellant is liable to pay excise duty on Polyester Staple Fibre manufactured out of

 

Virgin Plant Scrap, PET bottles, and waste and scrap obtained from dealers during the period 29.06.2010 to 30.11.2011.

2. Shri Gervasis P. Thomas, Learned counsel appearing on behalf of the appellant submits that vide Notification No. 12/2012-CEdated 17.03.2012 as amended exemption is provided from duty on Polyester Staple Fibre, further vide section 110 of Finance Act , 2014 the Polyester Staple Fibre or Polyester Filament Yarn  manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles, tow manufactured and captively consumed within the factory of its production for manufacture of goods specified in entry (1) had been exempted retrospectively from 29.06.2010 to 16.03.2012 ( from 17.03.2012 exemption had already been granted).
   • He further submits that taking into account legal and factual position Hon’ble CESTAT Ahmedabad has dropped the demandsin the matter of Khodiar Fibre Film Vs. Commr. C.Ex. Surat reported at 2015 (329) ELT 534 (Tri.- Ahmd). Following the same ratio demands were dropped in the matter of Alliance Fibre Ltd – 2016 (334) ELT 671 (Tri. Ahmd). In view of his above submission, he prays that the impugned order be quashed and set aside. He placed reliance on the following judgments:-
     • AllianceFibres Ltd – 2016 (334) ELT 671 (Tri.Ahmd)
     • KhodiarFibrefeil – 2015 (329) ELT 534 (Tri. Ahmd)
     • ShivaTaxfabs Limited – 2011 (24) STR 25 (Del)
     • CapitolFibres  Ltd – 2017(346) ELT 496 (Tri. Mum)

 

• P.LPolyfilsLtd – 2005 (183) ELT 27 (Tri. Del)
• Shiva TexfabsLtd – 2015 (315) ELT 83 (Tri.Del)

 

3. Shri Prabhat K. Rameshwaram, Learned Additional Commissioner (AR) appearing onbehalf o the Revenue reiterates the finding of the impugned

 

4. We have carefully considered the submission made by both sides and perused the records. We find that as of now the issue is no longerunder dispute for the reason that after passing the impugned orders Government has vide Section 110 of Finance Act, 2014 exempted retrospectively polyester staple fibre or polyester filament yarn manufactured from plastic scrap or plastic waste including waste polyethylene terephthalate bottles, tow manufactured for the period from 29.06.2010 to 16.03.2012. In the present case the period involved is 29.06.2010 to 30.11.2011 accordingly as per the retrospective amendment vide Section 110 of Finance Act, 2014 in the exemption Notification No. 12/2012-CE dated 17.03.2012  in the present case no demand is sustainable.
   • Considering the above retrospective change in the law this Tribunal passed the following orders:-

Khodiar Fibre Film Vs. Commr. C.Ex. Surat reported at 2015 (329) ELT 534 (Tri.- Ahmd) Para 4 onwards.

“4. Heard both sides and perused the case records. The issue involved in these appeals is whether PSF and POY manufactured by the appellant from plastic waste pet bottles, is liable to duty during the period April 2008 to March 2013. Another issue raised in the proceedings is whether waste and scrap of PSF and POY generated during the course of manufacturing is exempted under Notification No. 89/95-C.E., dated 18-5-1995. Learned Advocate relied upon the decision of the CESTAT, Delhi in the case of Shiva Texfabs Limited v. CCE, Chandigarh (supra). It was his case that all the issues in the present proceedings have been covered by CESTAT, Delhi. Paras 4 to 6 of the order No. 53987-53990/2014 dated 23-9-2014, passed by CESTAT, Delhi [2015 (315) E.L.T. 83 (Tri. – Del.)] in the above case, are relevant and are reproduced below :-

 

“4. In view of the aforesaid amendment it is evident that the impugned demand pertaining to the period 29th June 2010 to 16th March 2012 does not survive as the rate of duty on polyester staple fibre obtained from plastic scrap/waste including waste of PET bottles has been made Nil. The impugned goods were exempted with effect from 17-3-2012 vide Notification No. 12/2012-C.E., dated 17-3-2012. As regards the period from April 2009 to 28th June 2010, we find that in the case of CCE, Kanpur v.

G.P.L. Polyfils Limited. [2005 (183) E.L.T. 27 (Tri. )], CESTAT held as under

:

 

“4. Chapter 54 of the Tariff, relates to man-made Filaments and its Chapter note I defines man-made fibres, as under :-

 

“Throughout the First Schedule, the term man-made fibres means staple fibres and filaments of organic polymers produced by manufacturing processes, either :

 

• By polymerization of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives; or

 

• By chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates.

 

It remains undisputed that none of these processes, had been undertaken by the assessee in respect of their fibre so as to bring the same within the ambit of this Chapter 54 or even Chapter 55 which are part of the First Schedule. The learned Commissioner (Appeals) has, in our view, rightly dropped the duty demand against the assessees on this ground.

 

5. Thus the impugned goods were not classifiable under the Central Excise tariff during the period up to 28th June 2010 and they were brought under the scope of the said chapter in view of the insertion of Chapter Note 1A in Chapter 54 with effect from 29-6-2010. Consequently, for the period up to 28th June 2010 the goods were not liable to Central Excise duty as hasbeen held by the CESTAT in the case of G.P.L. Polyfils (supra). In this regard it is pertinent to note that the CBEC vide Circular dated 29-6-2010 stated that the case of G.P.L. Polyfils Limited would be relevant for the particular facts as in the said case and hence cannot be a binding precedent in other matters. This observation of CBEC was struck down by the Delhi High Court vide its decision dated 30-9-2011 in the CWO No. 5454/2010. There is no doubt that the Tribunal‟s decision have precedential value. It is also seen that the adjudicating authority while not following the said judgement has not quite distinguished the same and such an act (of not following the said order) is not in conformity with the requirement of judicial discipline inasmuch as the distiguishment has to be rational, logical and substantive enough to take away the precedential value of the judgement and the adjudicating authority‟s attempt at distinguishing the CESTAT order falls abysmally short of that requirement.

 

6. in this regard, it is not out of context to quote Para 4 of the DO letter F. No. 334/15/2014-TRU dated 10-7-2014 :

 

“4. Excise duty on Polyester Staple Fibre (PSF) and Polyester Filament Yarn (PFY) manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles (which is already exempt w.e.f. 8-5-2012) is being exempted retrospectively w.e.f. 29-6- 2010 to 7-5-2012. Clause 102 of the Finance (No. 2) Bill, 2014 refers. Intermediate product „Tow” arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29-6-2010 to 10-7- 2014 so as to provide relief to the manufacturers of such PSF/PFY. Clauses 102 and 103 of the Finance (No. 2) Bill, 2014 refer.”

 

5. In view of the above settled position of law, demands for the period after 29-6-2010 do not stand. PSF or PFY manufactured from plastic scrap and plastic waste were exempted as per the amendment carried under Notification No. 12/2012-C.E., dated 17-3-2012, an entry No. 172A was inserted by Notification No. 24/2012-C.E., dated 8-5-2012. So far as the period prior to 29-6-2010 is concerned, the same is covered by the decision of CESTAT in the case of CCE, Kanpur v. G.P.L. Polyfils Limited (supra). The argument of learned AR that POY is not a category of Polyester Filament Yarnis not correct in view of the HSN explanatory notes given under Central Excise Heading 54.02. As per these HSN explanatory notes, Synthetic Filament Yarn includes Partially Oriented Yarn, Fully Oriented Yarn and Texturised Yarn of polyester which will be covered by the description PFY mentioned in Section 110 of the Finance Act, 2014, which retrospectively exempted the said goods. Therefore, the entire period is covered in the demand show cause notices, either because the duty was not leviable on PSF and POY manufactured by the appellants or the same were exempted under retrospective exemption or by introducing entry No. 172A in Notification  12/2012-C.E., dated 17-3-2012. Due to the corrective

 

action taken by Revenue, it is held that there was no intention to charge duty on impugned PSF and POY for the period involved in these appeals.

 

6. So far as the chargeability of duty on waste and scrap in the manufacture of PSF and POY is concerned, the appellant has relied upon exemption Notification No. 89/95-C.E., dated 18-5-1995. On a specificquery from the Bench, learned Advocate appearing for the appellant fairly agreed that admissibility of Notification No. 89/95-C.E., dated 18-5-1995 was not raised by the appellants before the adjudicating authority. It is observed that exemption to waste and scrap under Notification  89/95-

C.E. is subject to certain conditions mentioned in proviso contained in this notification. The aspect of availability of exemption is, therefore, required to be remanded back to the adjudicating authority, who will decide the same in the remand proceedings, after giving opportunity of personal hearing to the appellant.

 

7. So far as imposition of penalties upon other appellants are considered, in our considered view, no penalties are attracted because on merits the appeals filed by the appellants are allowed.

 

8. Appeals filed by the appellants are allowed to the extent indicated ”

 

 

 

• AllianceFibre Ltd – 2016 (334) ELT 671 (Tri. Ahmd) Para 4 onwards

 

“4. For the purpose of proper appreciation of the case, we reproduce below the relevant portion of the earlier Final Order dated 20-5-2015 (supra) as under : –

 

“4. Heard both sides and perused the case records. The issue involved in these appeals is whether PSF and POY manufactured by the appellant from plastic waste pet bottles, is liable to duty during the period April, 2008 to March, 2013. Another issue raised in the proceedings is whether waste and scrap of PSF and POY generated during the course of manufacturing is exempted under Notification No. 89/95-C.E., dated 18- 5-1995. Learned Advocate relied upon the decision of the CESTAT Delhi in the case of Shiva Texfabs Limited v. CCE, Chandigarh (supra). It was his case that all the issues in the present proceedings have been covered by CESTAT Delhi. Paras 4 to 6 of the order Nos. 53987-53990/2014, dated 23-9-2014, passed by CESTAT Delhi in the above case, are relevant and are reproduced below : –

 

“4. In view of the aforesaid amendment it is evident that the impugned demand pertaining to the period 29th June, 2010 to 16th March, 2012 does not survive as the rate of duty on polyester staple fibre obtained from plastic scrap/waste including waste of PET bottles has been made Nil. The impugned goods were exempted with effect from 17-3-2012 vide Notification No. 12/2012-C.E., dated 17-3-2012. As regards the period from April, 2009 to 28th June, 2010, we find that in the case of CCE, Kanpur v. G.P.L. Polyfils Limited – [2005 (183) E.L.T. 27 (Tri.)], CESTAT held as under :

 

“4. Chapter 54 of the Tariff, relates to man-made Filaments and its Chapter note I defines man-made fibres, as under :-

 

“Throughout the First Schedule, the term man-made fibres mean staple fibres and filaments of organic polymers produced by manufacturing processes, either :

 

• By polymerization of organic monomers, such as polyamides, polyesters, polyurethanes or polyvinyl derivatives; or

 

• By chemical transformation of natural organic polymers (for example, cellulose, casein, proteins or algae), such as viscose rayon, cellulose acetate, cupro or alginates.

 

It remains undisputed that none of these processes, had been undertaken by the assessee in respect of their fibre so as to bring the same within the ambit of this Chapter 54 or even Chapter 55 which are part of the First Schedule. The learned Commissioner (Appeals) has, in our view, rightly dropped the duty demand against the assessees on this ground.

 

5. Thus the impugned goods were not classifiable under the Central Excise Tariff during the period up to 28th June, 2010 and they were brought under the scope of the said chapter in view of the insertion of Chapter Note 1A in Chapter 54 with effect from 29-6-2010.Consequently, for the period up to 28th June, 2010 the goods were not liable to Central Excise duty as has been held by the CESTAT in the case of G.P.L. Polyfils (supra). In this regard it is pertinent to note that the CBEC vide Circular dated 29-6-2010 stated that the case of G.P.L. Polyfils Limited would be relevant for the particular facts as in the said case and hence cannot be a binding precedent in other matters. This observation of CBEC was struck down by the Delhi High Court vide its decision dated 30-9-2011 in the CWO No. 5454/2010. There is no doubt that the Tribunal‟s decision have precedential value. It is also seen that the adjudicating authority while not following the said judgement has not quite distinguished the same and such an act (of not following the said order) is not in conformity with the requirement of judicial discipline inasmuch as the distiguishment has to be rational, logical and substantive enough to take away the precedential value of the judgment and the adjudicating authority‟s attempt at distinguishing the CESTAT order falls abysmally short of that requirement.

 

6. In this regard, it is not out of context to quote Para 4 of the DO letter F. No. 334/15/2014-TRU, dated 10-7-2014 :

 

“4. Excise duty on Polyester Staple Fibre (PSF) and Polyester Filament Yarn (PFY) manufactured from plastic waste or scrap or plastic waste including waste polyethylene terephthalate (PET) bottles (which is already exempt w.e.f. 8-5-2012) is being exempted retrospectively w.e.f. 29-6-2010 to 7-5-2012. Clause 102 of the Finance (No. 2) Bill, 2014 refers. Intermediate product “Tow” arising during the course of manufacture of such PSF/PFY is being exempted retrospectively w.e.f. 29-6-2010 to 10-7-2014 so as to provide relief to the manufacturers of such PSF/PFY. Clauses 102 and 103 of the Finance (No. 2) Bill, 2014 refer.”

 

5. In view of the above settled position of law, demands for the period after 29-6-2010 do not stand. PSF or PFY manufactured from plasticscrap and plastic waste were exempted as per the amendment carried under Notification  12/2012-C.E., dated 17-3-2012, an entry No. 172A was inserted by Notification No. 24/2012-C.E., dated 8-5-2012. So far as the period prior to 29-6-2010 is concerned, the same is covered by the decision of CESTAT in the case of CCE, Kanpur v. G.P.L. Polyfils Limited (supra). The argument of learned AR that POY is not a category of Polyester Filament Yarn is not correct in view of the HSN explanatory notes given under Central Excise Heading 54.02. As per these HSN explanatory notes, Synthetic Filament Yarn includes Partially Oriented Yarn, Fully Oriented Yarn and Texturised Yarn of polyester which will be covered by the description PFY mentioned in Section 110 of the Finance Act, 2014, which retrospectively exempted the said goods. Therefore, the entire period is covered in the demand show cause notices, either

 

because the duty was not leviable on PSF and POY manufactured by the appellants or the same were exempted under retrospective exemption or by introducing entry No. 172A in Notification No. 12/2012-C.E., dated 17- 3-2012. Due to the corrective action taken by Revenue, it is held that there was no intention to charge duty on impugned PSF and POY for the period involved in these appeals.

 

6. So far as the chargeability of duty on waste and scrap in the manufacture of PSF and POY is concerned, the appellant has relied upon exemption Notification No. 89/95-C.E., dated 18-5-1995. On a specific queryfrom the Bench, learned Advocate appearing for the appellant fairly agreed that admissibility of Notification No. 89/95-C.E., dated 18-5-1995 was not raised by the appellants before the adjudicating authority. It is observed that exemption to waste and scrap under Notification No. 89/95-C.E. is subject to certain conditions mentioned in proviso contained in this notification. The aspect of availability of exemption is, therefore, required to be remanded back to the adjudicating authority, who will decide the same in the remand proceedings, after giving opportunity of personal hearing to the appellant.

 

7. So far as imposition of penalties upon other appellants is considered, in our considered view, no penalties are attracted because on merits the appeals filed by the appellants are allowed.”

 

5. We find that the Sr. No. 172A of the Table appended to Notification No. 12/2012-C.E. (supra) allowed Nil rate of duty on “Polyester staple fibre (PSF) or polyester filament yarn, manufactured from plastic and plastic waste, including waste polyethylene terephthalate bottles” falling under Chapter 54 or 55 of the Schedule to the Central Excise Tariff Act, 1985. The learned Authorised Representative on behalf of the Revenue submits that the POY is not included in the exemption notification. He further submits that there is a difference between PSF and POY. On a close reading of the earlier order dated 20-5-2015 of the Tribunal, wefind that it is required to discuss this issue in detail. In this context, the learned Advocate on behalf of the appellant drew the attention of the Bench to the report of Department and Scientific Industrial Research (DSIR) as under : –

 

“01.   PRODUCT INTRODUCTION :

 

• Polyester filament yarn (PFY) is a long chain of synthetic polymer composed of an ester of a substituted aromatic carboxylic acid such as terephthalic acid. Polyester filament yarns are manufactured in a wide range of deniers and properties to suit virtually all textile requirements.

 

• Polyester filament yarns are manufactured either from molten polymer or polyethylene terephthalic acid (PET) chips by melt spinning process. In this process, molten polymer from a manifold is metered through various spinnerettes, having number of holes, to form filaments. These filaments are then solidified by air-quenching and wound on take- up winders after application of spin-finish. The yarns manufactured could be UDY (undrawn yarn), POY (partially oriented yarn) or FDY (fully drawn yarn) depending upon the winder speed and heat setting methods.”

 

6. We find from the above report that PFY covers UDF (Undrawn Yarn), POY (PartiallyOriented Yarn), or FDY (Fully Drawn Yarn), depending upon the winder speed and heat setting methods. In our considered view, the PFY as mentioned in the exemption notification, would also cover the POY as per the report of DSIR. So, we agree with the earlier order dated 20- 5-2015.

 

7. Regarding the demand of duty on waste of PSF and POY, the Tribunal already remanded this matter for examination of this issue in the light of exemptionNotification  89/1995-C.E., dated 18-5-1995. On a query

 

from the Bench, the learned Advocate submits that in earlier case, the de novo adjudication is still pending. So, it is appropriate that in the present appeal, this issue should be remanded to the adjudicating authority.

 

8. In view of the above discussion, the demand of duty along with interest on POY is set aside. The penalties are set aside. The adjudicating authority is directed to examine the demand of duty on waste of POY and PSF in the light of the earlier Tribunal order. Needless to say that the adjudicating authority shall give proper opportunity of hearing before passing the order. The appeal filed by the appellant is disposed of in the above terms. Early hearing application is dismissed on infructuous.”

 

In view of the retrospective amendment in Notification 12/2012-CE vide Section 110 of Finance Act, 2014 and the above decision considering the same retrospective provision, it is settled that during the relevant period in the present case the demand of excise duty on polyester staple fibre, admittedly manufactured out of Virgin Plant Scrap, PET Bottles and waste and scrap obtained from dealer is not sustainable.

5. Accordingly,the impugned orders are set aside and appeals are allowed with consequential relief.

 

 

(Pronounced in the open court on 03.04.2023 )

 

 

 

 

 

 

 

RAMESH NAIR MEMBER (JUDICIAL)

 

RAJU MEMBER (TECHNICAL)