Customs, Excise and Gold Tribunal - Delhi
Steel Authority Of India Ltd. vs Collector Of C. Ex. on 4 November, 1986
Equivalent citations: 1987(12)ECR66(TRI.-DELHI), 1994(70)ELT419(TRI-DEL)
ORDER M. Santhanam, Member (J)
1. The appellants filed a revision application before the Government of India against the order of the Appellate Collector, Central Excise, Calcutta dated 10-6-1981. The appeal was against the order of the RT-12 assessment by the Superintendent, Central Excise, Rourkela in respect of 17 matters. The annexure to the appellate order contains the particulars of the orders as also the details of the demands. Since one revision application was filed as per the procedure then in vogue the supplementary appeal Nos. 1822 to 1838 of 1986 have now been filed with applications for condonation of delay. The supplementary appeals have been filed for purpose of record and hence the application for condonation of delay Nos. 644 to 660 of 1986 are allowed.
2. The appeals relate to finalisation of assessment on RT 12 returns and DD 2 demands. Shri Kampani, learned Consultant initially urged that the Tribunal had considered the issue in Order No. 415/86/B1 dated 4-7-1986 in the case of M/s Steel Authority of India Ltd., Rourkela v. Collector of Central Excise, Calcutta (Appeal No. ED/SB/1021/80-B1) [1983 (14) E.L.T. 1972 (Tri.)]. In that case the Tribunal set aside the order of the Asstt. Collector on the ground that the principles of natural justice had been violated inasmuch as no show cause notice was issued prior to the issuance of DD 2 demand. The consultant argued that the ratio of that decision would apply and the orders are not valid. We heard Mrs. V. Zutshi, SDR at that stage.
3. As we felt that the present proceedings emanated mostly from assessment of RT 12 returns, we preferred to dispose of the cases on the merits as well. So the appeals were posted for hearing and we heard Shri Kampani for the appellants and Shri A.K. Jain for the department. The appellants manufacture steel ingots. Hot molten steel metal is poured into the ingot moulds. The appellants placed in between the ingot moulds and bottom stools, plates, so that the hot molten steel so poured into the steel ingots would not splash. For this purpose cast iron 'U' shape steel sheet was cut from the scrap of hot rolled sheet having thickness between 2 mm to 4 mm. This 'U' shape sheet is called 'trough'. In the course of the manufacture the trough, which is also scrap, is melted and added to the weight of the ingot. But in this process, the ingot mould was protected and its life was enhanced. According to the appellants the trough is manufactured only from scrap materials collected from the salvage. The Supdt. Rourkela initiated proceedings demanding duty on the quantity of trough used in the manufacture of steel ingots since 27-4-1972. The Assistant Collector passed orders in the RT 12 demanding duty on those products. The appellants preferred an appeal before the Appellate Collector who held that the trough was made from rejected cold rolled materials and that they are cold rolled strips of coil cuttings; they would be assessable to excise duty at the same rate as the main product. He also denied the benefit of Notification 75/67 dated 20-5-1967 because the end-product namely, troughs were classifiable under TI 26 while the cold rolled sheets were classifiable under TI 26 A(ii). The appellants have filed these revisions which on transfer to the Tribunal are being treated as appeals. Shri Kampani referred to Order No. 597-603/B/84 dated 13-8-1984 where the Tribunal has considered Notification 75/67 and has held that the product is only steel melting scrap.
4. Shri Kampani submitted that the trough should be considered as steel melting scrap. The appellants were paying duty on 'Later the better principle'. The amendment to Rules 9 and 49 were followed by the appellants and the procedure was regularised by the later Notification 197/83 dated 9-7-1983. In the first stage pig iron was converted into steel ingots and in the second the steel ingots were converted into iron and steel products. Duty was paid on the final products. Shri Kampani stated that the contractor picked up the scraps cut them with shears, bent them into 'U' shape, so that they could serve as a plate preventing the over flow of the molten metal. Hot metal had a temperature of 1300 degree and in view of the heat produced even these sheets got melted and merged with the ingot. There is no evidence produced by the Department to hold that the products would attract duty as strips. He also relied on Notification 75/67 dated 20-5-1967 and Notification 17/71 dated 27-3-1971 which provided for set off of duty if the ingots were already duty paid. There was no loss of duty and the contentions of the department were fallacious.
5. Shri A.K. Jain contended that the assessments were under RT 12 returns and hence no show cause notice was contemplated. He placed reliance on a decision reported in 1987 (31) E.L.T. 536, the Collector of Central Excise, Bangalore v. Karnataka Scooter Ltd. In that decision the Tribunal has held that for an act of classification done in terms of Rule 173(1), there was no need for issue of a formal notice. If the assessee did not agree with the classification done by the proper officer, it was open to him to avail of the remedies provided in the Act by way of claim for refund or an appeal to the appropriate Appellate Authority and the like. He also relied on Order No. 213/83-A dated 21-7-1983 M/s. Associated Pulp and Paper Mills, Ahmedabad v. Collector of Central Excise, Ahmedabad.
6. Regarding Notification 187/83 Shri Jain urged that the Notification was prospective and cannot be invoked by the appellants. He relied on 1983 (143) ITR 29 (Commissioner of Income Tax, Kerala-I v. Malayala Manorama & Co. Ltd.). The Notification 75/67 would not apply to this case because the trough would fall under TI 26 AA, while the ingots would come under TI 26. As the finished products and the raw-materials did not fall under the same item, the benefit of the Notification could not be availed of. Notification 17/71 would not apply because it referred to iron and steel products manufactured from duty paid ingots. The disputed products, according to Shri Jain, is hot rolled strips, as these were sheets taken out from the salvage by the contractor. They were not used for re-melting as ingots, but to serve as a protective plate. There is no evidence to show that it was a mere scrap. It was for the protection of the ingot moulds. The ultimate use of the trough is not material.
7. Though Shri Kampani submitted that there was no show cause notice issued to the DD 2 demand and relied on an earlier order by the Tribunal, we would point out that this plea would at best apply only to two periods i.e. Jan., '79 to June, '79 and July, '79 to Feb., '80. In regard to the other periods, we notice that they arise out of orders passed in RT 12 returns. The question whether a formal notice for classification in terms of Rule 173(1) was necessary came up for decision in 1987 (31) E.L.T. 536, the Collector of Central Excise, Bangalore v. Karnataka Scooters Ltd. Following an earlier decision of Madras High Court in 1979 Tax LR 2440 = 1979 (4) E.L.T. (J 65) (Mad.), Binny Ltd., Madras v. Supdt. of Central Excise, Group XIV, Guindy, Madras and Anr., the Tribunal has held that there was no need to issue a formal notice. Considering the scheme of assessment under self-removal procedure, we are of the view that the plea of violation of principles of natural justice does not arise on the facts of the present case. We are proceeding to deal with the case on merits.
8. It is common case that the appellants manufacture steel ingots and that they use 'U' shape sheets for the purpose of preventing splashing of the molten material. The Department contend that these sheets are strips and the appellants manufacture troughs which would be liable to duty. But according to the party it is merely a scrap picked up from the salvage and used for protection and spillage of the molten material and that there is no justification for classification of the material as strips. Needless to say that the burden of proving the classification under a particular head is squarely on the Department. We must state that there is no acceptable material on record to hold that these contrivances called as 'troughs' were made out of strips. Far from it the appellants have contended that the troughs were made of 'rejected cold rolled materials'. There is no proof to the contrary. The appellants have mentioned about it in the tender invited in 1976 from registered contractors. So it is manifest that the troughs were not made out of any strips but only from scrap. Shri Kampani also urged that these materials were picked up from the salvage depot where they collected the cuttings, rejects and all other scrap. If the material continued to be steel melting scrap and is not a strip as claimed by the department, then the classification would continue to be under TI 26. We also notice that this material got melted in the course of the further operations and became practically part of the molten material having gone into the ingot. The Appellate Collector has proceeded on the basis that the troughs were part of hot rolled or CR coils falling under TI 26AA. But there is no proof to support this allegation. Once the basis is established that the material is TI 26, the question of invoking TI 26AA does arise. Even assuming for the purpose of argument that TI 26AA would apply, the appellants were following the 'Later the better principle' and the duty had been paid on the final product, namely, ingots at the time of clearance. So there is no loss of duty either.
9. In the earlier decision of the Tribunal in Appeal No. 179 and other order No. 597-603 between the same parties a similar question arose. The contention of the department was identical and it was urged that the material was sub-standard strips or sheets classifiable under TI 26AA and not steel melted scrap. The Tribunal after considering the various submissions held that the troughs were made from scrap and were entirely used and consumed in the manufacture of ingots and merged with the ingots in the same as the rest of the steel melting scrap. The Tribunal went on to say that there was no logic in the argument that when the scrap was re-melted in the furnace, it should not attract duty, but when trough was made out of such scrap and it got melted in the moulds and merged with the steel ingots, it should attract the duty. The ratio of that decision would apply to the present facts as well. In the circumstances we hold that the impugned order cannot be sustained, and the appeals are allowed.
H.R. Syiem, Member (T)
10. The appellants submitted before the Appellate Collector if the steel used for melting trough is melted in the furnace no duty is charged but when the same sheet is melted in the ingot mould after it is converted into trough duty is charged. This is a very powerful argument but has not been answered by the Order-in-Appeal. Evidently the Central Excise Department accept that these sheets are steel melting scrap and so charge no duty when they are melted, as they should have done if they are consistent. It is only when they are made into troughs and when they are sold that the Central Excise charge duty. For those cleared, there might be good logic to charge duty since these sheets/strips are not melted. As troughs, they are in every respect steel melting scrap because they melt to form ingots.
11. It is observed from the order-in-appeal that the troughs are made from cut ends of the coils or sheets of uneven thickness. From all, one can see in the documents and the proceedings, the troughs are more appropriately called steel melting scrap, particularly when they are really melted, than strips. The assessment of the trough materials should be as steel melting scrap.