WIMCO LTD. Vs. COMMISSIONER OF CENTRAL EXCISE, LUCKNOW

JUDGEMENT

(1.) IN the impugned order the Commissioner of Central Excise confirmed a demand of duty amounting to Rs. 23,20,000/ -. The Commissioner imposed a penalty of Rs. 23,20,000/ - and also ordered payment of interest at an appropriate rate under Section 11AB of the Central Excise Act '44.

(2.) THE facts of the case briefly stated that during investigation of the accounts of M/s. Wimco Ltd. Bareilly, it transpired that the appellant was using paper and paper board for the manufacture of printed paper board boxes. During the course of manufacture of such boxes, waste/scrap/parings are generated, it was alleged that this waste was classifiable under Chapter sub -heading 4702.90 of Central Excise Tariff Act. Scrutiny of private records revealed that the appellant was selling this waste/scrap/parings. it was also noticed that they did not declare waste/scrap/parings; that they did not file classification list under Rule 173 -B nor issued any invoices prescribed under Rule 52A. Accordingly, a SCN was issued to the appellants asking them to explain as to why duty amounting to Rs. 23.20,000/ - should not be demanded from then and why penalty should not be imposed and why interest should not be charged. In reply to the SCN, the appellants submitted that scarp is generated as two stages; that it arises before the manufacturing operation starts; that the demand of duty on the quantity of scrap i.e. generated during the pre -manufacturing operation cannot be sustained; that the scrap is not a result of manufacturing process; that the word 'manufacture' is generally understood to mean as bringing into existence a new substance and does not mean merely to produce some changes in a substance; that manufacturing implies a change; that every change in an article is the result of treatment; that every treatment is not manufacture as something more is necessary; that there must be transformation and a new different article must emerge having a distinctive name, character and use. It was submitted that in their case, generation of scrap was not manufacture.

(3.) ARGUING the case for the appellant Shri V. Lakshmikumaran, Ld. Counsel submits that the appellant is a manufacturer of matches and match boxes. He submits that they purchased duty paid papers and paper board in addition to other inputs for manufacture of matches and match boxes. He submits that in the manufacture of match box, waste is generated at various stages; that some waste is generated before the start of manufacture of match boxes; that some waste is generated by end cutting and parings. He submits that Department has classified it under Chapter heading 4702.90 as 'recorded (waste and scrap) paper or paper board'; that the product is not recovered paper or paper board. He submits that for levy of duty there should be some manufacture; that the manufacture implies value addition. He submits that in their case paper and paper board is purchased from the market at a higher cost whereas the waste of paper and paper board is sold at just a nominal price which is not even 10% of the cost of the paper and paper board. He submits that thus no manufacture is involved.