M.N. CHANDURKAR, C.J.


The appellant original petitioner (hereinafter referred to as the petitioner) is a manufacturer of electric storage batteries. During the period of April 1968 to March 1970, 3385 battery containers which the petitioner company had obtained from other manufacturers became waste. According to the petitioner, these containers became waste due to the manufacturing process, such as, slotting, drilling, grinding etc. and the containers thus became defective and unusable.


2.The petitioner informed the Superintendent of Central Excise, that it would like to destroy these containers and the petitioner should, therefore, be given a credit in respect of them in their R.G. 23 account. The account referred to was an account kept by the Excise Department of the stock of material or component parts received for the manufacture of finished excisable goods prescribed under Rule 45A. The system of maintaining this account contemplates that as and when a manufacturer receives materials or component parts on which the duty of excise or additional duty has been paid, the amount of duty paid or additional duty paid is entered to the credit of the manufacturer. The amount standing to the credit of the manufacturer is deducted from the excise duty when the finished product in which the material or the component part is used and the manufactured goods are removed from the factory against duty payable in respect of the finished product.


3.The Superintendent of Central Excise, however, took the view, that when the number of containers would be destroyed, then, the amount of duty credited in respect of that number would be debited in the account R.G. 23.


4.The petitioner approached the Assistant Collector of Central Excise, for relief. He, however, confirmed the view taken by the Superintendent and directed that the petitioner should be given seven days notice in advance to the Assistant Collector of Central Excise, and the petitioner would be permitted to destroy the containers after a debit entry to the extent of the corresponding credit already given in respect of those 3385 battery containers is made in the account R.G. 23.


5.This order has been confirmed by the Collector and the Government of India. These adverse orders were challenged by the petitioner by filing a writ petition which has been dismissed on a construction of the provisions of Rule 56A. The judgment of the learned single judge is now challenged in this appeal.


6.Before we refer to the contention of the learned Counsel for the petitioner company, it is necessary to reproduce the relevant part of Rule 56A. It is as follows :-



"56A. Special procedure for movement of duty-paid material or component parts for use in the manufacture of finished excisable goods: (1) Notwithstanding anything contained in these rules, the Central Government may, by notification in the official Gazette, specify the excisable goods in respect of which the procedure laid down in sub-rule (2) shall apply. -


(2) The Collector may, on application made in this behalf and subject to the conditions mentioned in sub-rule (3) and such other conditions as may from time to time, be prescribed by the Central Government, permit a manufacturer or any excisable goods specified under sub-rule (1) to receive material or component parts or finished product (like Asbestos cement), on which the duty of excise or the additional duty under Sec. 2A of the Indian Tariff Act, 1934 (32 of 1934) (hereinafter referred to as the 'countervailing duty') has been paid, in his factory for the manufacture of these goods or for the more convenient distribution of finished product and allow a credit of duty already paid on such material or component parts or finished product, as the case may be; ..


(2)(i) A manufacturer so permitted shall -


(a) give prior notice to the proper officer before the excise duty paid or the countervailing duty paid material or component parts or finished product are received in his factory to enable the proper officer to be present at the time of the receipt of such material or component parts of finished product, as the case may be.(b) bring to the factory the material or component parts of finished product in original packing under the cover of A.R.I, or such other document as may be approved by the Central Board of Excise and Customs in this behalf or Bill of Entry evidencing the payment of excise duty or the countervailing duty :


Provided that, having regard to the period that has elapsed since the duty of excise was imposed on any such material, component parts or finished product, the position of demand and supply of the said goods in the country and any other relevant considerations, the Central Government may direct that with effect from a specified date all stocks of the said goods in the country, except such stocks lying in a factory, customs area as defined in the Customs Act, 1962 (52 of 1962) or 'warehouse as are clearly recognisable as being non-duty paid, may be deemed to be duty paid and credit of duty in respect of the said goods may be allowed at such rate and subject to such conditions as the Central Government may direct, without production of documents evidencing the payment of duty;


(c) ........


(d) ........


(e) ........


(ii) ........


(iii) Any material or component parts in respect of which credit has been allowed under sub-rule (2) may, with the prior approval of the Superintendent of Central Excise having jurisdiction -


(a) be removed for export under bond or on payment of duty; or


(b) be removed on payment of duty for home use or for repairs.


(iv) Any waste arising from the process of manufacture in which the materials or component parts, in respect of which credit has been allowed under sub-rule (2) may, be subjected in the manufacturer's factory shall -


(a) be removed on payment of duty, or


(b) where it belongs to such class or category of waste as the Central Government may, from time to time, by order specify for the purpose, be removed from the said factory without payment of duty for being used in the manufacture of the class or category of goods as may be specified in the said order subject to the procedure under Chapter X of the Central Excise Rules, 1944, being followed, or(c) on application by the manufacturer and if found unfit for further use or not worth the duty payable thereon, be destroyed in the presence of the officer, the duty payable thereon being remitted.


(d) If any material or component parts, in respect of which credit has been allowed under sub-rule (2), are not only accounted for as having been disposed of in the manner authorised in this rule, the manufacturer shall, upon a written demand being made by the proper officer, pay the duty leviable on such goods within ten days of the notice of demand.


(vi) Except to the extent provided in the second proviso to sub-rule (2) the credit allowed in respect of any material for component parts shall be utilised towards payment of duty on the finished excisable goods in the manufacture of which such materials or component parts are used or on the materials or component parts themselves and no part of such credit shall be refunded in cash or by cheque ....'


7.It may be pointed out that sub-clause (c) of clause 3(iv) has been substituted by the following sub-clause with effect from 25.8.1973 by Central Excise Rule 173K -" *


(c) if found unfit for further use or not worth the duty payable thereon, be destroyed by the manufacturer, the duty payable thereon being remitted subject to the condition that the manufacturer shall inform the proper officer in writing the quantity of such waste and the date on which he proposes to destroy it, at least seven days in advance and shall observe all the conditions as may be prescribed by the Collector by a general or special order with regard to the manner of disposal of such waste......

"8.The learned Counsel contends that the petitioner's case is expressly covered by sub-clause (c) of Rule 56A(3)(iv) and, therefore, since it is not disputed that a number of batteries have become waste, the petitioner will be entitled to the credit in respect of those battery containers for adjustment against duty payable in respect of batteries subsequently. According to the department, the petitioner's case is squarely covered by rule 56A(3)(vi) and the battery containers having become waste, the credit entry made when the battery containers were taken by the petitioner for the purpose of manufacture of batteries must be reverted in respect of the number of batteries which became waste. In order to appreciate this contention, it is necessary to appreciate the scheme of Rule 56A.


9.Rule 56A(2) which we have reproduced above provides for a facility with regard to payment of duty in respect of goods manufactured, for the manufacture of which the manufacture has brought into the factory material or component parts or finished product, on which the duty of excise or the additional duty under Sec. 2A of the Indian Tariff Act, 1934, has already been paid. This is permissible only in respect of the goods notified by the Central Government under Rule 56A(1). The facility is that the duty paid on the material or component parts or finished product which are used for the manufacture of excisable goods is given credit for when the duty on the finished product is to be paid. One of the essential conditions for being entitled to the benefit of this Rule is that the finished excisable product must itself be liable to duty and the duty has been paid for material or component parts used for the manufacture of the finished product under the same item or sub-item as the finished excisable goods. The manufacturer has to give prior notice to the proper officer before material or the component parts on which the excise duty or the countervailing duty is paid are received in his factory to enable the proper officer to be present at the time of the receipt of such material or component parts, as the case may be.


10.Rule 56A(3)(iv) deals with waste arising from the process of manufacture. Under that rule, any waste, arising from the process of manufacture to which the materials or component parts in respect of which credit has been allowed under sub-rule (2) may be subjected in the manufacturer's factory, can be removed on payment of duty. However, where such waste belongs to such class or category of waste as the Central Government may, from time to time, by order specify for the purpose, be removed from the said factory without payment of duty, for being used in the manufacture if the class or category of goods as may be specified in the said order subject to the procedure under Chapter X of the Central Excise Rules, 1944, being followed. Sub-clause (c) which is relevant permits the manufacturer, on application made by him and if the waste is found unfit for further use or not worth the duty payable thereon, to destroy the waste in the presence of the proper officer. Sub-clause (c) further provides that in such cases the duty payable on the waste is to be remitted.


11.The agreement of the learned Counsel which is founded on this part of the rule is that the battery containers have been rendered useless and they have become waste which fact does not seem to be in dispute, and since the opening part of sub-clause (iv) of rule 56A(3) refers to any waste, it must be construed as referring also to 'waste' on which no duty is payable. Therefore, according to the learned Counsel when Rule 56A(3)(iv) refers to remission of duty, as no duty will be payable by the manufacturer on the waste material, the credit given in respect of these batteries when they were brought within the factory must continue as it is. The further argument is that if some amount stands to the credit of the manufacturer in the account R.G. 23, then when on a further occasion the manufactured goods are cleared, the amount standing to the credit of the manufacturer was liable to be adjusted against a part of the duty which is payable by the manufacturer. This argument, in our view, is based on a misapprehension of the scope of Rule 56A(3)(iv). Rule 56A(3)(iv) undoubtedly refers to any waste arising from the process of manufacture to which the materials or component parts, in respect of which credit has been allowed, have been subjected. Though in the opening part of clause (iv), it is not made expressly clear that the waste contemplated thereby is only waste which is dutiable, all the three clauses which follow the substantive part of Rule 56A(3)(iv) clearly indicate that the subject matter of sub-clause (iv) is waste which is liable to duty as waste. Clause (a) expressly refers to removal of waste on payment of duty. Clause (b) refers to removal without payment of duty and clause (c) refers to remission of duty. There cannot be payment of duty unless duty is leviable. There cannot be removal without payment of duty unless duty was otherwise required to be paid. Equally, there cannot be remission unless the particular commodity was liable to excise duty. The concept of remission itself contemplates that but for remission, duty would be leviable on that commodity. There is, therefore, no doubt that when Rule 56A(3)(iv) refers to removal of waste either with payment of duty or without payment of duty or after remission of duty, it can only refer to 'waste' which is by itself a dutiable commodity. The Tariff items contain instance of waste itself being subjected to duty. Entry 18 refers to man-made fibres, man-made filament yarns and Cellulosic spun yarn and Explanation IV reads as follows : -"....... Non-cellulosic wastes, all sorts - nine rupees per kilogram......"


We also find that Entry 16-B in Schedule I refersinter aliato 'plywood, blackboard ......... and artificial or reconstituted wood being wood shavings, wood chips, saw dust, wood flour or other lingneous waste agglomerated with natural or artificial resins or other organic binding substances, in sheets, blocks, boards or the like'.


12.It is, therefore, a well-recognised concept for the purpose of Excise Act that 'waste' as a product is liable to duty. The scope of Rule 56A(3)(iv) must, therefore, in our view, be restricted to only waste which arises in the process of manufacture where the materials or component parts in respect of which credit has been given have been subjected to such process of manufacture. In the instant case, though generally the battery containers would be discarded as waste as they are not capable of being utilised, by virtue of its condition as a result of some process to which it is subjected, it cannot be said to be waste as contemplated by Rule 56A(3)(iv) of the Excise Rules. Consequently, it must necessarily follow and it has not been disputed by the learned Counsel for the department that if a case like the present one is not covered by Rule 56A(3)(iv)(c), the provision with regard to previous intimation will also not be attracted in such a case.


13.Rule 56A(3)(vi) specifically makes it clear that no part of the credit can be refunded in cash or cheque. In other words, the object of Rule 56A(3)(vi) is that even though credit has been given in respect of any material or component parts which are to be utilised, that credit can be dealt with only in the manner prescribed by sub-clause (vi). The manner is that it is only adjustable towards payment of duty on the finished excisable goods in the manufacture of which the materials in respect of which credit has been given are used.


14.It is sought to be canvassed before us that an amendment has now been made by substituting new sub-clause (vi) in rule 56A(3) and under that amendment, credit which is originally given is allowed to be utilised in respect of any finished excisable goods. This part of the rule reads as follows :-" *


(vi)(a) - The credit of duty allowed in respect of any material or component parts may be utilised towards payment of duty on any finished excisable goods for the manufacture of which such material or component parts were permitted to be brought into the factory under sub-rule (2) where such material or component parts are cleared from the factory as such, on such material or component parts.


(b) No part of such credit shall be utilised save as provided in sub-clause (a) or shall be refunded in cash or by cheque.'


15.There is undoubtedly a slight difference in terminology between sub-clause (vi) as it originally stood and sub clause (vi) as it now stands. It appears to us that under the original rule, a certain correlation had to be established between the excisable goods manufactured and the material or component parts in respect of which credit had been given to the manufacturer. By a change in the terminology, the rule now permits the credit of duty allowed in respect of any material or component parts to be utilised towards payment of duty or any finished excisable goods for the manufacture of which such material or component parts were permitted to be brought into the factory under sub-rule (2). It is urged that the new rule must be read as merely clarificatory. It is difficult for us to accept this contention. The new rule having been brought into force on 25th August, 1973, it must necessarily govern transactions which take place on and after that date. As we have already pointed out, the subject matter of the original Rule 56A(3)(vi) was that no credit shall be refunded in cash or cheque. That part has been retained even under the new rule. But so far as the old rule was concerned, there was no right to have the credit utilised for any goods which were manufactured and which were not correlated to the material or component parts in respect of which credit was given. The object of the rule appears to be that the manufactured goods in respect of which duty was to be levied and to be identified as one in the manufacture of which the material or component parts in respect of which credit was given, have been used.


16.The only reasonable course which can be adopted in a case where the material or component parts in respect of which credit has been used do not enter into the manufacture of any finished product is to reverse the credit entry to the extent of the duty on which such material or component parts which have not been used. We are, therefore, unable to find any infirmity in the view taken by the learned Judge confirming the view taken by the Department.


17.The learned Counsel has brought to our

notice a decision of the learned single judge of this court inE.I.D. Parry (India) Ltd., Madrasv.Government of India rep. by Joint Secretary, 1979E.L.T.(J 253). The facts in that case appear to have weighed with the learned 3udge for the view which he has taken. The manufacturer in that case had imported a quantity of 745.490 M.T. of Rock Phosphate and a quantity of 560.298 M.T. was utilised for the manufacture of fertilizers. The fertilizer was cleared between 4.10.1971 and 14-10-1971. The Assistant Collector made a demand under Rule 56(A)(vi) on the footing that the manufacturer became liable to duty under Rule 56A(3)(v). It was contended on behalf of the manufacturer that it was not incumbent on the manufacturer to utilise the imported Rock Phosphate in one and the same process and so long as it was properly accounted for. Rule 56A(3)(vi) was complied with. The department took the stand that there must be a correlation between the actual quantity of the goods imported and the ultimate product. In dealing with that contention, the learned judge took the view that the manufacturer need not correlate the Rock Phosphate imported to the ultimate finished product and in any case since the entire Rock Phosphate imported was already utilised, ultimately there was complete utilisation. It is true that in this decision the learned judge has taken the view that the quantity of Rock Phosphate imported need not be correlated to the ultimate finished product. However, it appears to us that final decision in that case did not rest really on the construction of Rule 56A(3) (iv) and what seems to have weighed with the learned judge was the fact that in any case, ultimately the entire quantity of Rock Phosphate had been utilised. However, on the view which we have taken that there is no rule which enables the petitioner to utilise the excess credit in respect of any further product, we do not think it necessary to go into the correctness or otherwise of the view taken by the learned Judge.18.Having regard to the view taken by us, this appeal must fail and is dismissed. There will be no order as to costs.