Excise on crumb rubber

This query is : Resolved

Nashik R Vaishnani (Querist)
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30 April 2013 Dear Sir,

Please advice regarding Excise duty on Crumb Rubber.

Excise is applicable or not in Crumb Rubber Powder. Chapter Heading 4004

CA.M Chowdary

CA.M Chowdary (Expert)
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01 May 2013 Commissioner Of Central Excise ... vs Gujarat Reclaim And Rubber ... on 29 November, 2005
Equivalent citations: 2006 (104) ECC 398, 2006 ECR 398 Tri Mumbai
Bench: A Wadhwa, S T S.S.
ORDER

Archana Wadhwa, Member (J)

Page 399

1. The Commissioner (Appeals) vide his impugned order has held that "Crumb Rubber Powder" is not excisable inasmuch as no manufacture can be said to have taken place. For arriving at the above findings, he has relied upon the earlier decision of the Tribunal in the assessee's own case as and as confirmed by the Hon'ble

Supreme Court. For better appreciation we reproduced the relevant paragraph of the Commissioner (Appeal) orders:

I observe that the appellants are manufacturers of reclaim rubber products falling under Chapter sub heading No. 4003.00 and the old tyres etc. are required for the process and are cut into pieces. Subsequently, cut pieces are sieved and small pieces are segregated. Such small pieces are crushed and the 'crumb rubber powder' is obtained and it is also known as tread rubber powder. The appellants have been following this process for quite sometime and paying nil rate of duty in view of the CEGAT judgment in their own case. However, they received a show cause notice dated. 28.12.1998 which was confirmed by the A.C.C.E Ankleshwar, who placing reliance or Chapter Note 6 of Chapter 40 has held that crumb rubber powder is classifiable under Chapter heading 40.04 and chargeable to duty. Chapter Note No. 6 of Chapter 40 which has been relied upon by the adjudicator reads as under:

6. For the purposes of heading No. 40.04, the expression 'waste, parings and scrap' means rubber waste, parings and scrap from the manufacture of working of rubber and rubber goods definitely not usable as such because of cutting-up, wear or other reasons.

Accordingly, I, observe that the 'crumb rubber powder', the procedure for obtaining which has been mentioned above, would not find a place in 40.04 in view of the wordings therein. Here, I would like to mention that in Indian Organic Chemicals Ltd. v. CCE , it was held by the Hon'ble Apex Court

in para-4 as under:

In our view, learned Counsel for the Revenue is right. Having regard to the fact that the Tribunal has itself held that the physical and Page 400 chemical characteristics of the original input waste and the resultant waste are the same it is difficult to see how the resultant waste can be said to have been manufactured for no commodity distinct or different from the original input is produced.

I observe that the ratio of the above judgment would squarely be applicable to the present case as the appellant's product is obtained form the input waste and the resultant product, has the same properties and characteristics as the input waste has. In this context, it is also relevant to note that as reported by the appellants, in respect of another factory of theirs at Solapur, the show cause noticed issued in this regard was discharged by the Assistant Commissioner holding the classification in their favour. Moreover, it can be seen that the properties of the goods remain same even after crushing, no chemical change takes place during the process and only the physical form is changed. Accordingly, I am of the view that merely changing of the physical form would not amount to manufacture. Finally, coming to the Tribunal decision in the appellants own case, reported in [1983-ELT 2401 (CEGAT), the Tribunal had held that old rubber crushed into powder is not manufactured and crushing/powdering does not amount to manufacture. This judgment was challenged before the Hon'ble Supreme Court, but, the said appeal was dismissed. Moreover, I find that the contention of the adjudicator that the said judgment was with reference to old tariff and in view of the fact that the new tariff came into existence in 1985, the ratio of the said judgment would not be applicable does not have any force as the facts remain the same and the ratio that old rubber crushed into powder would not amount to manufacture would apply even now.

2. Revenue in their memo of appeal have reiterated the same grounds of applicability of Chapter Note 6. After hearing both the sides, we find that while rejecting the Revenue's appeal against the earlier order of the Tribunal in the assessees own case, the Hon'ble Supreme Court has observed as under:

The Tribunal has found that the powder formed by crushing the old rubber is neither commercially nor chemically a new product. Learned Counsel for the petitioner contends that the Tribunal has held that the powdered rubber is not a new product merely because no chemical reaction is involved in the process of crushing and that this is erroneous. This is a very narrow reading of the Tribunal's order. The Tribunal has not only given a finding that the powder is secured by a mere process of crushing but also that the crushed product was not a new product. This is essentially a finding of fact. We, therefore, dismiss the appeal.

As is clear from above, it has been held that the process of crushing old rubber does not amount to manufacture. The position would not change under the new Tariff inasmuch as the basic criteria of the goods being the result of manufacturing activity is required to be satisfied first. The Hon'ble Page 401 Supreme Court in the case of Commissioner of Central Excise Chandigarh-I v. Markfed Vanaspati & Allied Indus. 2003 (153) ELT 491 (S.C.) has held that the burden to prove that there is manufacture is on the Revenue and merely because an item falls in a tariff entry, manufacture must not be deemed.

3. As such, we find that the view adopted by Commissioner (Appeals) is in accordance with law declared by the Hon'ble Supreme Court and cannot be faulted upon. As such, no merits are found in the Revenue's appeal. The same is accordingly rejected.

(Dictated in Court)
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