Customs, Excise and Gold Tribunal - Bangalore
Sandur Manganese And Iron Ores Ltd. vs Commissioner Of C. Ex. on 6 April, 2004
Equivalent citations: 2004(94)ECC243, 2004(168)ELT75(TRI-BANG)
ORDER S.L. Peeran, Member (J)
1. This appeal arises from Order-in-Original No. 7/99, dated 30-8-99. The appellants are engaged in the manufacture of Ferro Alloys falling under sub-heading 7202.00 of the Schedule to the Central Excise Tariff Act. The Department initiated proceedings against them on the ground that they had clandestinely cleared 'other waste materials' during the period from 1992-93 to 1996-97 without payment of Central Excise Duty. The show cause notice relied on Rule 3(b) of the Rules for Interpretation of the Schedule to the Central Excise Tariff Act which reads as follows :-
"Mixtures, composite goods consisting of different material or made up of different components, and goods put up in sets, which cannot be classified by reference to (a), shall be classified as if they consisted of the material or component which gives them their essential character, insofar as this criterion is applicable."
In view of this Rule 3(b) it was contended that the other waste materials which constitutes Ferro Manganese, Ferro Silicon, Ferro Chrome, besides sand etc., are required to be classified under sub-heading 7204.90 and hence demands were raised. The appellant took the stand that the item which was cleared by them was waste and the Ferro Alloys present in the waste was only to an extent of 2 to 5%. It was contended that the Chapter Note 8(a) of Sec. XV is not applicable to the facts of the case as the waste and scrap does not arise in the course of manufacture. It is also contended that any waste which is not marketable cannot be considered as goods. It is their further submission that the duty calculated on waste and scrap would be 400 times and waste sold in the market sold for Rs. 250/- PMT while the specific duty was Rs. 800 - Rs. 1000/- PMT. It was submitted that it was not the legislature intent to tax on such waste which was removed as a rubbish and it should not also be included within the ambit of waste under Heading 7204.90. As waste and scrap that requires for classification of 7204.90 should satisfy the Note 8(a) of Section XV of the Central Excise Tariff Act, 1985 which means metal waste and scrap should arise from the manufacture of mechanical working of metals and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons. It is contended that 95-98% of the said waste comprise of sand, clay, coke fine, charcoal fine etc., and only 2-5% comprises of Ferro Alloys. It is said that the case is covered by the judgment of the Apex Court rendered in the case of Union of India v. Indian Aluminium Co. Ltd. [1995 (77) E.L.T. 268 (S.C)], Moti Laminates Pvt. Ltd. v. CCE [1995 (76) E.L.T. 241 (S.C.)] and Tribunal rulings rendered in the case of Markfed Vanaspati & Allied Inds. v. CCE, Chandigarh [2000 (116) E.L.T. 204], Hindustan Lever Ltd. v. CCE, [1985 (22) E.L.T. 232]. It was also submitted that the appellants had not suppressed facts and they held a bona fide belief that such rubbish and waste could not be considered a marketable commodity and to be considered as goods. There was no intention to evade duty and hence they relied on the judgment rendered by the Apex Court in the case of Padmini Products v. CCE [1989 (43) E.L.T. 195 (S.C.).] and Pushpam Pharma Co. v. CCE [1995 (78) E.L.T. 401 (S.C.)] and CCE, Patna v. Tata Iron & Steel Co. Ltd. [2004 (165) E.L.T. 386 (S.C.)]. It is their further submission that in order to attract Note 3(a) of Interpretative Rules the essential character of the component should be Ferro Alloys. Ferro Alloys being only 2 to 5% it cannot be considered as having essential character in the waste and hence Rule 3(b) of Rules to Interpretation of the Schedule to Central Excise Tariff Act does not arise in the facts of this case.
2. Ld. DR submitted that as they are selling the waste at the rate of Rs. 250/- PMT, it is to be considered as a marketable commodity. In this regard he relied on the judgment of CCE v. BPCL [1995 (77) E.L.T. 790] and CCE v. India Gelatine and Chemical [1996 (88) E.L.T. 425 (T)].
3. On a careful consideration of the submission, it is seen that the Department has not produced any evidence to show that the essential character in the waste is that of Ferro Alloys. It is the contention of the appellants that the said waste was lying mixed up with sand, clay, charcoal fine, coke fine, to an extent of 95-98%. They were all thrown out and lying in open yard. The persons who purchased was purchasing at Rs. 250/- PMT whereas the tariff rate was Rs. 800-1000 PMT. It was the contention that there could be no legislative intent to tax the same. There is force in the submission made by the appellants. The Revenue has not produced any evidence to show that the item is marketed as waste of Ferro Alloys. Furthermore as per Note 8(a) of Sec. XV, the waste and scrap means metal waste and scrap from the manufacture or mechanical working of metals and metal goods definitely not useful as such because of breakage, cutting up, wear or other reasons. As per the Note 8(a), the waste and scrap should be of the metals which could have a higher content of the metal. In the present case the percentage is hardly 2 to 5%. The Department ought to have produced evidence to show that the same can be treated as waste and scrap within the meaning of Note 8(a) of Sec. XV of the Tariff, There is no such evidence of marketability and commercial understanding that the waste which comprises 2 to 5% of non-Ferro Alloys should be considered as waste and scrap of Ferro Alloys for classification under Heading 7204.90. The Department has not discharged their burden to hold the item to be an excisable one and sold as goods in the market. Furthermore, on this very issue the Apex Court has considered all the judgments considered by the appellants as in the case of CCE v. Tata Iron & Steel Co. Ltd. [2004 (165) E.L.T. 386] and has held that such scrap and waste which are removed as rubbish cannot be considered as waste and scrap. It has been held that any rubbish can be sold and it need not necessarily be a marketable commodity known to commerce and it should be worthwhile to trade in. The findings recorded by the Apex Court in Paras 16, 21 and 22 are noted herein below ;-
"16. We are of the opinion that the dross and skimming are merely the refuse, scum or rubbish throughout in the process of manufacture of aluminium sheets and, therefore, cannot be said the result of treatment, labour or manipulation whereby a new and different article emerges with a distinctive name, character or use which can ordinarily come to the market to be brought and sold. Merely because such refuse or scum may fetch some price in the market does not justify it being called a by-product, much less an end-product or a finished product.
21. This Court, in conclusion, held that the onus to show that particular goods on which excise duty is sought to be levied have gone through the process of manufacture in India is on the Revenue and that the Revenue have done nothing to discharge this onus.
22. In our opinion, this Court in Indian Aluminium Co. Ltd. (supra) has held that merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold and everything, however, which is sold is not necessarily a marketable commodity as known to commerce and which, it may be worthwhile to trade in. The issue involved in this case is governed by the past decisions of the Tribunal arid also of this Court where the Tribunal and this Court held that the zinc dross and skimming arising as refuse during galvanisation process are not excisable goods. The Tribunal, in our opinion, has rightly relied upon the decision of this Court in Indian Aluminium Co. Ltd. (supra) and in view of the above decision of this Tribunal following this Courts opinion in Indian Aluminium Company Ltd. (supra), we disagree with the appellant's that zinc dross, flux skimming and zinc scallings are goods and hence excisable."
4. In view of our findings and the ratio of the Apex Court judgment we find force in the appellant's contention that the items are not waste and scrap for classification under the said Chapter Heading. The impugned orders are not legal and proper, they are set aside by allowing the appeal.