Customs, Excise and Gold Tribunal - Delhi
Indian Aluminium Co. Ltd. And Anr. vs Collector Of Central Excise on 18 June, 1987
Equivalent citations: 1987(13)ECC226, 1987(12)ECR1192(TRI.-DELHI), 1987(31)ELT158(TRI-DEL)
ORDER K.L. Rekhi, Member (T)
1. Aluminium 'dross' is a residue which forms in the furnace during melting of aluminium ingots and also to some extent during subsequent treatment and holding operations of molten baths in the furnace. The point of dispute in this appeal is whether such dross can be considered as excisable 'goods'. The appellants admitted before us that aluminium dross was saleable commodity and it had commercial and industrial uses. Yet, placing reliance on the Bombay High Court judgment at 1980 E.L.T. 146 (Bom) - Indian Aluminium Co. Ltd. and another v. A.K. Bandyopadhayay and Ors. which was later confirmed by the Division Bench of the same High Court on 26-2-1986 in Appeal No. 524 of 1980, they claimed that dross was not goods and hence not liable to duty. There is no dispute between the parties that if dross is held to be goods, it would fall for classification under the residuary item No. 68 of the Central Excise Tariff.
2. We have carefully considered the rival submissions. We find that the appellants' reliance on the Bombay High Court judgments aforesaid is no longer valid for two reasons:
(1) These judgments relate to clearances of dross prior to 1975 while in the case of the appellants the relevant period is subsequent to 1981. There have been successive amendments in the statutory Central Excise Tariff between 1-3-75 and 1-3-81 and because of those changes in the law, the Bombay High Court judgments can no longer be considered binding on the point whether aluminium dross is 'goods' or not.
(2) The facts and the issue before the Bombay High Court were distinguishable from those in the instant case before us.
3. o take up the legislative changes first, the position before 1-3-1975 was that aluminium dross was then not covered by any item in the Central Excise Tariff In other words, it was not an excisable article at, all. The department itself accepted this position before the Single Judge Bench of the Bombay High Court. However, (1) with effect from 1-3-1975, the residuary item 68 was introduced in the tariff which covered "All other goods, not elsewhere specified, excluding....";
(2) by another amendment in 1980, the following Explanation was added in item 68%:-
"Explanation - For the purposes of this item goods which are referred to in any preceding item in this Schedule for the purpose of excluding such goods from the description of goods in that item (whether such exclusion is by means of an Explanation to such item or by words of exclusion in the description itself or in any other manner) shall be deemed to be goods not specified in that item";
(3) in 1981, a specific sub-item "waste and scrap" was inserted in the various non-ferrous metal items in the tariff, including item No. 27 relating to aluminium, and simultaneously the scope of the new sub-item was statutorily defined by Explanation III to item 27 (as also similarly in the case of other base metal items) in the following terms:
"Explanation III - 'Waste and scrap' means waste and scrap of aluminium fit only for the recovery of metal or for use in the manufacture of chemicals, but does not include sludge, dross, scalings, skimmings, ash and other residues."
The amendment of 1981 is significant in that the Parliament specifically provided for taxing certain metal wastes (and scrap). The argument that certain articles were non-taxable just because they were by-products or process wastes was no longer available. No doubt, by virtue of the aforesaid Explanation, dross and skimmings etc. stood excluded from the scope of the new sub-item 'Waste and scrap' in item No. 27. But such exclusion no longer meant that they became totally non-excisable. So long as it could be shown that they were marketable goods, their classification under the residuary item No. 68, read with the Explanation thereunder, had now to be considered.
4. The test of what are 'goods' was laid down by the Supreme Court in South Bihar Sugar Mills case (ECR C-257-SC). The test is that "to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market". The appellants admit before us that their aluminium dross is marketed. There is nothing on record to show that any part of it is destroyed or thrown away as a total waste. The whole of it is bought and sold in the market. The buyers use it as a raw-material in chemical industries. Applying the test laid down by the Supreme Court to the facts of the case before us, the conclusion is inescapable that aluminium dross is 'goods'. Dross has, no doubt, very little metal content and, for that reason, it has been aptly excluded from the metal item No. 27. But since the facts before us show that it is not only ordinarily but wholly marketed by the appellants and it has industrial uses as a raw-material, it would still be goods and would fall under the residuary item No. 68.
5. While it is true that certain residues have been taken out of the scope of "waste and scrap" in item 27, it does not mean that such residues would not be goods unless they are fit for recovery of metal therefrom. Explanation HI below item 27 itself provides that "waste and scrap" may be fit for the recovery of metal "or for use in the manufacture of chemicals." Therefore, if a certain type of process wastes, say dross, has been specifically excluded from item 27, it could yet be goods under some other item of tariff so long as it is proved that it is generally bought and sold and is commercially and industrially a usable material. In this connection, we invite attention to the judgment of this Tribunal reported at '1985 ECR - 857 (CEGAT) - M/s. Super Tyres (Pvt.) Ltd. - in which the question of excisability of process wastes was dealt with at length in the context of the numerous authorities of the High Courts, and the Supreme Court cited therein.
6. Coming now to the second reason mentioned by us in paragraph 2 above, we find that the issue directly posed before the Bombay High Court was a different one. The issue was whether aluminium dross and skimmings were finished excisable goods in terms of the proviso to Rule 56A (2). The proviso to Rule 56A (2) provided that no credit of duty shall be allowed in respect of any material used in the manufacture of finished excisable goods if such finished excisable goods produced by the manufacturer were exempted from the whole of duty leviable thereon. Now, it is nobody's case that dross and skimmings are finished goods. They are only a process waste. The word 'waste' has a relative meaning in the industrial parlance. What is a waste for one manufacturer, could be a worthwhile raw-material for another manufacturer. It all epends upon what particular line of production each of the two manufacturers has. For the purpose of excisability under the Central Excise Tariff, it is not necessary that the goods must be finished goods. In the Tribunal judgment in the case of Super Tyres aforesaid, numerous examples have been given of process wastes, by-products and semi-finished goods which have been specifically made liable to duty in the tariff. The question before us is not whether aluminium dross was finished goods but only whether it was goods. The limited question before us being different than the one before the Bombay High Court, we feel it has to be answered according to the test laid down by the Supreme Court in the South Bihar Sugar Mills case aforesaid.
7. Though the direct question before the Bombay High Court was different from the one before us, the said High Court, nevertheless, ' had occasion to make observations on the point whether dross and skimmings were goods. We re-produce below the relevant portion from paragraph 24 of their judgment:-
"24. The question that one must ask oneself is whether therefore dross and skimmings are "goods". It may well be that dross and skimmings may be capable of feching some sale price, dross and skimmings may be capable of fetching some sale price. For that matter any rubbish can be sold. But that is not the criterion. It cannot be said that dross and skimmings are the result of treatment, labour or manipulation whereby the end-product is dross and skimmings. They are merely the scum thrown out in the process of manufacture of aluminium sheets. Therefore it cannot be said that dross and skimmings are transformation resulting in a new and different article with a distinctive name, character or use or that they ordinarily come to the market to be bought and sold and are known to the market. The article or goods manufactured from the aluminium ingots was not dross and skimmings but the aluminium sheets. It was the aluminium sheets therefore that were the end-product or the finished product and not the dross and skimmings which were merely the refuse or scum or rubbish thrown out in the course of the manufacture of the finished product, namely, the aluminium sheets. As stated earlier, in. the affidavit-in-reply, there has throughout been a repeated emphasis that the dross and skimmings are a by-product and that the aluminium ingots were used by the Company in the manufacture of dross and skimmings."
X X X X X X X X X X X X X X Refuse or scum thrown off during the process of manufacture cannot by any stretch of imagination be considered as a by-product and merely because such refuse or scum may fetch some price in the market does not justify it being clothed with the dignity of being called a by-product, much less an end-product or a finished product. The aluminium ingots were utilised by the Company for the manufacture of the end-product, namely, aluminium sheets and certainly not for the manufacture of scum and refuse like dross and skimmings. Dross and Skimmings cannot be called a finished by-product nor can it be said that out of the aluminium ingots it was dross and skimmings, in other words "ashes", that the Company manufactured. Furthermore, the fact that the dross and skimmings are not excisable is borne out by the admissions contained in the affidavit-in-reply itself."
The Delhi High Court had an occasion to notice the aforesaid judgment of. the Bombay High Court and observed in paragraph 21 of their judgment at 1983 ELT 292 (DEL) - Khandelwal Metal and Engineering Works v. U.O.I and Ors. that "it was greatly influenced by the fact that dross and skimmings were not excisable goods which was a condition requisite for the applicability of proviso to Rule 56 A (2)". The Delhi High Court judgment was confirmed by the Supreme Court by their judgment at 1985 (20) ELT 222 (SO - Khandelwal Metal & Engineerings Works and another v. U.O.I and Ors.. This judgment related to Brass scrap, another article comprised in the entry "waste and scrap". However, certain conclusions drawn by the Supreme Court on the question of excisability of by-products and process wastes are relevant and we reproduce them below:-
"34. X X X X X X X X X X X X X X The production of waste and scrap is a necessary incident of the manufacturing process. It may be true to say that no prudent businessman will intentionally manufacture waste and scrap. But, it is equally true to say that waste and scrap are the byproducts of the manufacturing process. Sub-standard goods which are produced during the process of manufacture may have to be disposed of as "rejects' or as scrap. But they are still the products of the manufacturing process. 'Intention' is not the gist of the manufacturing process.
X X X X X X X"
It is quite evident that the Supreme Court over-ruled the assumption of the Bombay High Court that by-products and process rejects could not be called manufactured articles. It also over-ruled the other assumption of the Bombay High Court that process rejects could not be considered by-products of the manufacturing process. Aluminium dross is in no way different from other process rejects or wastes.
8. The aforesaid discussion would have revealed that the law, the facts as well as the issue before the Bombay High Court were different. In view of the successive legislative amendments, the Supreme Court judgments in the cases of South Bihar Sugar Mills and Khandelwal Metal and Engineering Works, the Delhi High Court judgment in the case of Khandelwal Metal & Engg. Works and the other case law cited in the Tribunal's judgment in Super Tyres' case aforesaid, it cannot now be said that the Bombay High Court's observation that dross and skimmings were scum and rubbish and hence not goods is still binding. Since the dross arose in the course of a manufacturing process, it was a by-product or process waste which was quite distinct from the parent material namely, aluminium ingots. Further, since the appellants have clearly admitted before us that their aluminium dross is a fully saleable commodity known to the market and finds industrial uses, it comes within the definition of 'goods' as laid down by the Supreme Court in South Bihar Sugar Mills case. We find it no where mentioned in the Supreme Court judgment that an industrial material ceases to be goods just because its price is low.
9. We are conscious that there have been previous judgments of this Tribunal in which a contrary view was taken, relying entirely on the Bombay High Court judgment aforesaid. The legislative changes and other authorities cited by us in the preceding paragraphs were not adverted to in those judgments. We, therefore, do not feel bound by those judgments.
10. In the result, we uphold the lower orders and reject this appeal..
M. Santhanam, Member (J)
11. I had the benefit of perusing the order of my Ld. Brother, Sh. K.L. Rekhi, M(T) but I regret that I am unable to agree with his findings. The two questions that would come up for decision in this appeal would be (i) whether the aluminium dross are liable to duty under TI 68 and (ii) whether the explanation in Item 68 would be attracted in this case?
12. On the first question, the decision of the Bombay High Court in the case of the same party governs the issue. The Bombay High Court in 1980 E.L.T. 146 (Indian Aluminium Co. and Another v. A.K. Bandyopadhyay and Ors.) had to consider the show cause notice demanding the company to pay excise duty of Rs. 2,29,231.32 on the ground that duties had not been levied on aluminium dross and skimmings and that the amount was recoverable from the company under Rule 10 of the Central Excise Rules. The company was receiving duty paid aluminium ingots and was availing the proforma credit under 56A. In paragraph 22, the High Court has observed, "It is difficult to come to the conclusion that dross and skimmings are "goods" and the contention to the contrary urged on behalf of the company was not entirely devoid of substance". The High Court held that dross was nothing but "scum thrown off, from metals in something; refuse, rubbish or worthless impure metal" and skimming is "that which is removed or obtained from the surface by skimming". The High Court after referring to the affidavits filed in the case regarding the nature of the product and after adverting to Delhi Cloth Mills case held that the "dross and skimmings cannot be said to be finished excisable goods". Section 3 of the Central; Excise Act envisages that there shall be levied and collected in such a manner as may be prescribed duties of excise on excisable goods (emphasis supplied) other than salt which are produced or manufactured in India at the rates set forth in the First Schedule. So, the basic requirement to attract duty would be that the imposition of the levy should be under Section 3 of the Act. In view of the categorical findings of the Bombay High Court, Aluminium Dross cannot be considered as goods. It is significant to note that this judgment of the Single Judge has been subsequently affirmed by the Division Bench of the Bombay High Court dated 24.2.86 (Appeal No. 524/80) in Misc. Petition 1661 of 1975. The Tribunal by a Three Member Bench has followed this Ruling in 1984 E.C.R. 1871 j (Collector of Central Excise, Chandigarh v. M/s Mehra Ferro Alloys, Amritsar). The decision cited by Sh. A.K. Jain, SDR, in the case of Khandelwal Metal & Eng R. Works and Another Etc., v. Union of India and Ors. 1985 (20) E.L.T. 222 was in respect of Brass Scrap consisting of Taps and Pipes. The Hon'ble Supreme Court held that "Brass 'Scrap imported by the party was the by-product of the manufacturing/ product-The Brass Scrap was known in commercial parlance by that same and was excisable as such. The scrap is re-cycled by extracting the metal." Since excise duty was payable on such scrap, the imported brass was subjected to the additional duty in order that indigenous brass scrap may not suffer in competition with the imported brass scrap. That decision will have no relevancy to the present facts, for, there is no proof on the side of the department that the dross is capable of recycling and extracting metals. In this connection, I may also point out that in the judgment of the Delhi High Court 1983 E.L.T. 292 (Khandelwal Metal & Engg. Works v. Union of India and Ors.) (The identical matter which came up subsequently before the Supreme Court) has considered the Bombay High Court judgment of the present party. In paragraph 21, it is stated that the case was clearly distinguishable. It is observed "In the present case dross, skimmings, ash have been excluded from the definition of waste/scrap and are thus not excisable goods. It is the waste/scrap which is fit for recovery of metal which is an excisable goods." This observation of the Bombay High Court indicates that the liability to duty would arise only if they are excisable goods. The definition of waste and scrap excludes dross and skimmings and there is considerable force in the contention of the appellants that the aluminium dross s not excisable goods and duty liability will not arise under Item 68.
13. The emphasis is laid on the explanation to Item 68 which has been referred to by my learned Brother in Paragraph 3 of his order. In Order No. 187/87-B-I (Collector of Central Excise, Patna v. M/s Bihar Extrusion Company Ltd., Jamshedpur) in Appeal No. 76/83-B-I dated 1.4.87, Sh. H.R. Syiem, Member (T) and I had an occasion to consider the identical issues. As observed in paragraph 4 of the judgment, "Nobody engages in manufacturing aluminium dross and skimmings. It arises during the manufacture of "Aluminium Articles". It is not goods in the conventional or classical sense that one understands goods to be, even though these scum and reject can be sold and do fetch some price."
14. In paragraph 5 of the aforesaid order it is stated that "to be excisable, an article or substance must be a product of active and conscious effort on the part of the manufacturer who engages in its production and whose aim is to produce it. When a manufacturer whose aim is to produce good aluminium, is burdened by the appearance of some dross and skimming, it stretches logic too much to say that scum and refuse, simply because they appear in the factory during or in the manufacturing processes, must be goods to be honoured by an excise duty." Scrap is totally different from dross. The nature of the manner in which dross arises affirms my view that it cannot be considered as excisable goods.
15. In the explanation to Item 68, to which my learned brother has adverted to in paragraph 3 of this order, it is stated that goods which were excluded by means of an explanation to the item or by words of exclusion in the description itself or in any other manner shall be deemed to be goods not specified in the item. Sh. A.K. Jain, SDR argued that as "dross" has been mentioned in the explanation to item 27 by way of exclusion, item 68 would be attracted. The explanation to item 27 is not the exclusion contemplated in the explanation to Item 68. Dross and Skimmings are held to be not goods as they are merely waste and in order to be precise about the definition of "waste and scrap" "dross and skimmings" have been referred to in the Explanation. In this connection, if we look at Item 30, Motors specifically designed for use in Gramophone or Recordplayer and all parts of such motors are not included in that item. This is the type of exclusion that has been contemplated in Item 68. In order No. 187/87-B-I, we have referred to Item 40, Item 33D, all these are exclusions in their own rights and are bought and sold in the regular market. The exclusion of dross and skimmings in the Explanation to Item 27, is not an exclusion, but only for clarifying and exactly defining "waste and scrap". As dross, skimmings etc., are not excisable goods and they cannot be considered as waste and scrap either, Explanation 3 to Item 27 was added. It would be inappropriate to classify dross under Item 68 on that account.
16. In the absence of a judgment of some other High Court differing from the view expressed by the Bombay High Court and inasmuch as this view has been followed in regard to the identical goods by a Three Member Bench of the Tribunal, in my view, the appeal should be allowed.
In view of the difference of opinion between the two of us, the matter is referred to the Hon'ble President for hearing and disposal. The difference is basically on the point whether Aluminium Dross and Skimmings were 'goods' or not.
M. Santhanam, Member (J)
1. The appeal is against the order of the Collector, Central Excise (Appeals), Madras dated 15.1.83. The appellants manufacture aluminium wire rods out of duty paid aluminium ingots. The waste that occurs during the process of manufacture is dross/ ash. The Assistant Collector held in his order dated 26.7.82 that dross/ ash/skimmings were correctly classifiable under T.I. 68. On appeal the Appellate Collector confirmed the order.
2. Shri Daya Sagar, Consultant, submitted that the decision of the Bombay High Court in the case of Indian Aluminium Company Ltd., 1980 ELT 146, as also, the decision of the Central Board in the case of. Aluminium Manufacturing Company, Calcutta, 1981 ELT 89, would apply to the facts of the case and the items are not liable to duty under T.I. 68.
3. Shri H.L. Verma, S.D.R., urged that in view of the decision of the Supreme Court in the case of Khandelwal Metal & Engineering Works and Anr. etc. v. Union of India and Ors., 1985 (20) ELT-222 (S.C.), waste and scrap would be by-products of the manufacturing process and in view of Explanation to T.I. 68 introduced under the Finance (No. 2) Act of 1980 dated 19.6.80 duty would be attracted under T.I. 68.
4. In T.I. 27, item (aa) waste and scrap was inserted under the Finance Act of 1931. Explanation III to Item 27 was introduced in 1931 and excluded dross/ash/skimmings from T.I. 27. In view of this Explanation it is urged that duty under Item 68 would be attracted.
5. The decision of the Supreme Court in the case of Khandelwal Metal & Engineering Works was in respect of brass scrap. The observations in para 10 of the judgment indicates that it is in respect of scrap recycled for extracting metal. In paragraphs 34 and 35 the Hon'ble Supreme Court had referred to waste and scrap being an integral part and an inevitable incident of the manufacturing process. The decision of the Delhi High Court in 1983 ELT 292 (against which the appeal was filed before the Hon'ble Supreme Court) had an occasion to consider the ratio of the Bombay High Court in Indian Aluminium (cited supra). In paragraph 21 of that judgment it is stated that the case before the Bombay High Court was clearly distinguishable. The Delhi High Court was concerned only in respect of waste/scrap fit for recovery of metal which is an excisable goods. Hence reliance cannot be placed on the judgment of the Hon'ble Supreme Court for the purpose of deciding this case.
6. The waste and scrap metallurgically considered would be prime metal and could be melted in the furnace. In respect of dross/skimmings, the Tribunal had an occasion to consider the structural and metallurgical concept in Order No. 567/86-B1, Collector of Central Excise, Guntur v. Anam Electrical Manufacturing Co., Rajahmundry, dated 9.9.1986. In paragraph 7 of that order it is observed :
"Dross and skimmings, on the other hand,, are not structurally or metallurgically the same as the prime metal; they are refuse given off when the molten metal is cleaned by having its top skimmed. Metals that contain large quantities of foreign matter and impurities form a scum at the top when they are melted, because the metal being heavier sinks to the bottom forcing the lighter impurities to the top. These float at the top and are skimmed away, leaving a relatively purer metal. At the same time, certain foreign matter, heavier than the metdl, may not melt but settle at the bottom. These impurities also have to be removed and that is done when the metal is poured from the crucible to another container. Dross and skimmings, therefore, are not metal in the same class as waste and scrap but dregs, impurities, scum and refuse, which contain a percentage of the metal. It may even be possible to recover some of the metal from them, but it would be a serious mistake to class them as equal to waste and scrap. Nobody in the metal industries accepts them as the metal from which they are given off."
7. From the above it is clear that "dross and skimmings" cannot be equated or considered as a part with "waste and scrap". In 1984(4) ETR 754, Collector of Central Excise, Chandigarh v. Mehra Ferro Alloys, Amristar, Special Bench 'B1 (three members) has held following the Bombay High Court judgment, (cited supra), that aluminium, dross and skimmings in question were not liable to payment of Central Excise duty.
8. An argument could be advanced that the judgment of the Bombay High Court was prior to the insertion of T.I. 27-AA and the Explanation. But in my view that will not make a difference or bring 'dross and skimmings' under Item 68 because the Bombay High Court has held in paragraph 22 that it would be difficult to come to the conclusion that dross and skimmings are 'goods'. The observation is as follows:-
"As stated earlier, dross is nothing but 'scum thrown off from metals in something; refuse, rubbish or' worthless impure metal and skimming is' that which is removed or obtained from the surface by skimming."
Unless the basic requirement that dross and skimmings become goods is established, a liability to duty will not be attracted. The Explanation III to T.I. 27 merely defined "waste and scrap" and hence one cannot say that dross and skimmings were excluded from the description of the goods in that item. The Explanation to T.I. 68 introduced in 1980 would be applicable only if the items are 'goods'.
9. There are certain judgments of the Tribunal which have considered the judgment of the Bombay High Court. In 1985 ECR 857, M/s. Super Tyres (Pvt.) Ltd., New Delhi v. Collector of Central Excise, Delhi, the Tribunal had to consider whether rubber scrap would be goods. The decision of the Bombay High Court (cited supra) was not followed therein in view of the facts involved. In paragraph 6 of that judgment the Tribunal has observed that "scrap rubber, though sold by the appellants at relatively a cheap price, could not be called rubbish! It was brought and sold and is used for making other useful articles'. From this observation it can be concluded that the Tribunal had to deal with rubber scrap which had a distinct name, character and use compared to the raw-material. In 198,3 ELT 1186, Crew & Co. Ltd., District Shahjahanpur (U.P.) v. Collector of Central Excise, Allahabad, the question arose whether 'bagasse' was dutiable under T.I. 68 of the CET. Adverting to Bombay High Court judgment it is stated in paragraph 13 that it is certainly distinguishable because what resulted during the process of manufacture of aluminium tubes from aluminium sheets was a thrown up waste not having any distinct trade usages or identifiable name whereas in that case, the product had an established and recognized trade name as well as use. In 1983 ECR 498, M/s. Chemtech Industries, Bombay v. Collector of Customs, Bombay, it was held that by-products and wastes are manufactured goods and liable to duty. The Bombay High Court judgment was considered by the Tribunal but I notice that zinc ash had been mentioned by name as a taxable product in the Tariff. In 1984(16) ELT 317, Sanghvi Enterprises, Jammu, Tawi, v. Collector of Central Excise, Chandigarh, the Tribunal had to consider whether saw dust was dutiable under T.I. 68. In paragraph 6 it is stated that any by-product or intermediate or residual product in the manufacture of particular goods would be covered by the word 'production'. But in this decision it was held that saw dust was a different article from timber log and apart being used as fuel for burning, and other uses also. In 1985(6) ETR 383, Collector of Central Excise, Kanpur v. Hindustan Scientific Glass and Fancy Works, Makhanpur, the issue was about the taxability of 'bhagar'. In paragraph 10 it is observed that 'bhagar' was basically glass and had to be considered as a manufactured item. It was regularly bought, sold and it fetched considerable value. In 1982 ELT 937, Oudh Sugar Mill Ltd. v. Union of India and Ors., the Allahabad High Court has considered the scope of liability to duty of molasses. It must be noted that at the time of the hearing of the writ petitions the plea that molasses was a waste product was given up (vide para 1). The contention was that molasses was not a waste product but an intermediate product. Molasses being a by-product or intermediate to sugar it became an excisable article. It cannot be said that dross or skimmings are by-products or intermediate products.
10. Since there is a direct decision of the Bombay High Court on that point and there is no contrary decision of any other High Court relating to the same product. I am of the view that dross and skimmings are not liable to duty under T.I. 68. The decision of the Tribunal in the case of Mehra Ferro Alloys confirms this view. Following the judgment of the Bombay High Court and the Tribunal I hold that dross and skimmings are not liable to duty. The Appeal is, therefore, allowed.
I beg to differ with my learned brother. My views are as recorded in my judgment dated 31-3-87 in Appeal No. E-522/83-B1 relating to M/s. Indian Aluminium Co. Ltd.
In view of the difference of opinion between the two of us, the matter is referred to the Hon'ble President for hearing and disposal. The difference is basically on the point whether Aluminium Dross and Skimmings were 'goods' or not.
S. Venkatesan, President
1. Appeal Nos. E. 522/83-B1 of M/s Indian Aluminium Co. Ltd and E. 550/83-B1 of M/s Mysore Rolling Mills (P) Ltd., came up separately before Special Bench B1 of this Tribunal, consisting of Members Shri K.K. Rekhi and Shri M. Santhanam. In each case there was a difference of opinion between the two learned Members. The matters were therefore referred to me as President, in accordance with the proviso to Sub-section (5) of Section 129C of the Customs Act, 1962, read with Sub-section (1) of Section 35D of the Central Excises and Salt Act, 1944.
2. The matters were listed for hearing before me. Copies of the separate orders recorded by the two learned Members were furnished to both sides. The two sides were also furnished with a copy of the point of difference as formulated by the two learned Members. This read as follows in both the cases:-
"The difference is basically on the point whether Aluminium Dross and Skimmings were 'goods' or not".
3. Since the identical question was involved in both the cases, Shri. N. Mookherjee, on behalf of M/s Indian Aluminium Co. Ltd., started the arguments. He placed strong reliance on the decision of the Bombay High Court in the case of Indian Aluminium Co. Ltd and Another v. A.K. Bandyopadhyay and Ors. (1980 ELT 1"6 (Bom.). In para 21 of this judgment, 4 conditions were laid down which would disqualify a manufacturer from taking credit of duty under Sub-rule (2) of Rule 56A. One of these was that there should be manufactured goods. In paras 22 to 2k it had been held that aluminium dross and skimmings were not goods. They were in the nature of "refuse or scum" but not a by-product. Since they were not goods, the amendment of TI 68 referred to by the learned Member Shri Rekhi did not affect the position. Shri Mookherjee submitted that the above decision of a learned Single Judge had subsequently been upheld in appeal by a Division Bench of the Bombay High Court, which had specifically recorded that it was in agreement with the discussion as well as the ultimate conclusion of the learned Single Judge.
4. Reference had been made to the judgment of the Delhi High Court in the case of Khandelwal Metals & Engineering v. Union of India and Ors. 1983 ECR 91D (Delhi). This however would not support the case of the Department. That case was with reference to brass scrap. In para 29 of the judgment it was recorded that brass scrap was admittedly a marketable commodity known in the market. The Delhi High Court noticed and distinguished the decision of the Bombay High Court in the case of Indian Aluminium Co. Ltd. It took note of the fact that (aluminium) dross and skimmings were not excisable goods. The judgment of the Delhi High Court would therefore go against the Department.
5. The Khandelwal case had been taken up to the Supreme Court, whose judgment has been reported in 1985 (20) ELT 222 SC. In para 10 of the decision, it had been recorded that brass scrap of the kind imported by the appellants was a by-product of the manufacturing process. This decision would not however help the Revenue, because such brass scrap could not be equated with aluminium dross and skimmings.
6. In the Tribunal's Order No. 367/86-B1 dated 9.9.86 in the case of Collector of Central Excise, Guntur v. M/s Anam Electrical Manufacturing Co., a two-Member Bench of the Tribunal had held that aluminium dross and skimmings were not goods and could not be assessed to duty under any item of the tariff. The same view had been taken by a three-Member Bench of the Tribunal in the case of Collector of Central Excise, Chandigarh v. Mehra Ferro Alloys, Amritsar, reported in 1984 (4) ETR 754. The same view had been taken by a two-Member Bench of the Tribunal in its Order No. 221/87-B1 in appeal No. E. 581/83-B1 in the case of Indian Aluminium Co. Ltd v. Collector of Central Excise, Calcutta. In yet another Order No. 187/87-B1 in appeal No. E. 76/83-B1 in the case of Collector of Central Excise, Patna v. Bihar Extrusion Co. Ltd., Jamshedpur, the same view had been taken. In para 4 of this order it had been observed that the sale of something could not be a reason for categorising it as a manufactured product for the purpose of subjecting it to excise duty. In para 7 of the same order, the Bench had rejected the argument that the explanation added under Item 68 would have the effect of bringing dross and skimmings within the scope of that item;
7. Shri Mookherjee referred to the observation of the learned Member Shri Rekhi in para 4 of his order to the effect that the buyers of the dross and skimmings used it as a raw material in chemical industries. He submitted that he was not aware of the basis for this statement. The learned Member had referred to the Tribunal's order in the case of Super Tyres (Pvt) Ltd. 1985 ECR 857-(CEGAT). That case related to rubber scrap, which was similar to steel scrap and had a market. The decision could not be made applicable to aluminium dross and skimmings. The various authorities cited in that order all related only to waste and scrap and therefore had no bearing on the present issue. Aluminium dross and skimmings were not manufactured, since no one made any effort to bring them into existence. They just arose during the manufacture of something else. Accordingly, Shri Mookherjee submitted that the view expressed by the learned Member Shri Rekhi was not correct and that the view expressed by Member Shri Santhanam should be upheld.
8. Appearing on behalf of M/s Mysore Rolling Mills (P) Ltd., Shri Daya Sagar stated that he adopted the arguments of Shri M. Mookherjee, and desired to make some additional submissions.
9. In para 7 of Member Shri Rekhi's order in the case of Indian Aluminium Co. Ltd., he had quoted at length from the judgment of the Supreme Court in the case of Khandelwal Metals (para 6 supra). In para 3b of the judgment it had been observed that "the production of waste and scrap is a necessary incident of the manufacturing process". The learned Member had taken the view that the Supreme Court had overruled the assumption of the Bombay High Court that by-products and process rejects could not be called manufactured articles. Shri Daya Sagar submitted that the observations of the Supreme Court could not be applied to dross and skimmings. They were applicable to defective goods arising in the course of manufacture, which could be considered as having been manufactured. Dross and skimmings were not process rejects in the same sense.
10. Member, Shri Rekhi had referred to the Tribunal's decision in the case of Super Tyres (para 7 supra). In para 6 of that order, support had been drawn from the judgment of the Allahabad High Court in the case of Oudh Sugar Mills, where reference had been made to the word "production" as referring to finished and semi-finished articles. Shri Daya Sagar submitted that the word "produced" in Section 3 of the Central Excises and Salt Act referred to goods like tobacco, coffee and betelnuts which were not manufactured. He cited the judgment of the Supreme Court in the case of Empire Industries Ltd and Ors. v. Union of India and Ors. (1985 ECR 1169 SC). In para M it had been observed that the word "produced" contemplated some expenditure of human skill and labour in bringing the goods concerned into the condition which would attract the duty.
11. With reference to the legislative intention, Shri Daya Sagar referred to the speech of the Finance Minister while presenting the budget proposals for 1981. In para 110 of the budget speech it had been stated as follows:-
"110. The other major area where rationalisation of the tariff entries has been proposed is in regard to non-ferrous metals under the respective entries in the Central Excise Tariff. There has been considerable debate and dispute on the question of assessment of waste and scrap of these metals. To set these at rest it is proposed to specifically cover waste and scrap of these metals under the respective tariff entries".
No reference had been made to dross and skimmings, showing that there was no intention to tax them.
12. Again, in the "comments on budget changes" (apparently issued by the Ministry of Finance), it had been explained that to avoid disputes waste and scrap were being specifically included in a number of tariff items including TI.27, by incorporation of a new sub-item. A specific mention had been made of zinc ash and slag but none regarding aluminium dross and skimmings.
13. Simultaneously Government had issued Notification No. 33/81-CE dated 1-3-1981, exempting aluminium waste and scrap from duty if made from duty paid ingots. Shri Daya Sagar submitted that Government could not have intended that duty should be charged on inferior material, namely dross and skimmings, when waste and scrap were exempt from-' duty.
14. Shri Daya Sagar also drew attention to the new Central Excise tariff which came into force on 28-2-1986. Heading No. 2602.00 specifically covers slag, ash and residues containing metals or metallic compounds. Under Notification No. 119/86-CE dated 1-3-1986, goods falling under Headings 2601 and 2602 had been exempted from duty, showing that it was not the intention to charge duty on slag and residues.
15. It was pointed out to Shri Daya Sagar that there appeared to be a contradiction in his arguments. To begin with he had argued that dross and skimmings were not "goods". However, he had also pointed out that under the new tariff they were treated as goods liable to excise duty, although exempted from duty. Shri Daya Sagar replied that there was no contradiction. Since the new tariff contained a specific description of the material, the question whether it was "goods" did not arise.
16. Shri Daya Sagar referred to the Tribunal's order in the case of Addison and Company Ltd. v. Collector of Central Excise, Madras 1985 (22) ELT 437 (Tribunal). In para 21 reference had been made to the "mischief rule" applicable to the interpretation of statutes. Reference had been made to the observation of the Supreme Court that expressions used in statutes should ordinarily be understood in a sense in which they best harmonised with the object of the statute. Shri Daya Sagar also cited the judgment of the Supreme Court in the case of Madhav Rao Scindia v. Union of India (AIR 1971 SC 530) to the effect that the Court would interpret a statute agreeably to law and justice, and that there was a presumption against the lawmaker intending injustice. In the end he submitted that the view expressed by Member Shri M. Santhanam should be upheld.
17. On behalf of the respondent Collector, Smt. V. Zutshi submitted that reference had been made to various judgments which related to a period prior to the amendment of Item 27. This item, as well as others relating to other non-ferrous metals, had been amended through the Finance Bill of 1981. It was instructive to see what amendment had been made for each metal.
18. In the case of copper (TI. 26A), the explanation inserted specifically excluded slag and dross from the scope of the expression "waste and scrap". In the case of zinc (TI. 26B) the explanation included dross and ash. In the case of aluminium (TI. 27) the explanation excluded dross and skimmings. In the case of lead (TI. 27A) the explanation excluded slag, ash and other residues. All these tariff items had been amended at the same time through the same Finance Bill. Accordingly, there most be some rationale in the view taken regarding the scope of each item. It was clear that dross, skikkings etc. could have come within the scope of "waste and scrap" of each of these non-ferrous metals, but had been deliberately excluded in some cases.
19. The appellants had -raised a question- of equity (para 13 supra). Such considerations could not be read into the statute, as it was well-known 'that there was no equity about a taxing statute.
20. It had also been argued that dross and skimmings were not useful for recovery of metal and therefore could not be brought within the scope of T.I. 27, relating to aluminium. This argument was not correct. Even if certain goods were "artifically" included within the scope of a tariff item, they had to be assessed to duty.
21. If dross and skimmings were goods, they could only be assessed under Item 68. This was the effect of the amendment to Item 68, consequent on the judgment of the Gujarat High Court in the case of Darshan Hosiery Works 1980 ELT 390 (Guj.). On the question whether dross and skimmings were goods, the well-known judgments of the Supreme Court in the Delhi Cloth Mills and South Bihar Sugar Mills cases were relevant. The commodity should have a distinctive name, character or use. Dross and skimmings answered this test. They had a distinctive name, and were differentiated from waste and scrap. Obviously their character and use were different from those of waste and scrap. This had not only been admitted by the appellants, but emphasised by them. Accordingly, in terms of the D.C.M. and South Bihar Sugar Mills judgments, aluminium dross and skimmings should be considered as goods.
22. Reference had been made to several orders passed by Special Bench B1 of the Tribunal, to the effect that aluminium dross and skimmings were goods. All these orders had been based on the judgment of the Bombay High Court in the case of Indian Aluminium Co. Ltd. 1980 ELT 146 (Bom.) That judgment had been delivered prior to the judgment of the Gujarat High Court in the case of Darshan Hosiery Works, and the consequent amendment of Item 68. Further, the decision of the Bombay High Court had been in the context whether aluminium dross and skimmings were "finished excisable goods". This would be clear from para 21 of the judgment. The Bombay High Court had given importance to the point that the assessees had not set out to manufacture dross and skimmings. This however was not a relevant consideration. Thus, bagasse and molasses were accepted to be liable to excise duty even though no one set out to manufacture them.
23. In para 22 of the Bombay High Court judgment, reference had been made to the Supreme Court judgment in the D.C.M. case, and to the criterion that "goods" must be something which can ordinarily tome to the market to be bought and sold. The aluminium dross and skimmings satisfied this criterion. It was established that they did come to the market and were actually sold. They satisfied the definition of manufacture, even though they might not have been intentionally produced. Smt. Zutshi referred to the observation of the Bombay High Court in para 26 of its judgment to the effect that the dross and skimmings were not the result of treatment, labour or manipulation. She submitted that treatment, labour and manipulation had undoubtedly been used, and had resulted in aluminium sheets and dross and skimmings. It was not necessary that there should have been an intention to manufacture dross and skimmings.
24. The Bombay High Court had observed that "refuse or scum thrown off during the process of manufacture cannot by any stretch of imagination be considered as a by-prod jet". Smt. Zutshi submitted that this observation had been made with reference to the wording of the non-ferrous metal items before 1981, when those items were amended. The observation would not have forced after the amendment.
25. Smt. Zutshi also drew attention to the Bombay High Court's observation that "the thrust of the manufacturing process must be the production of the finished product". The basic issue in that case was whether aluminium dross and skimmings were "finished excisable goods", and not whether they were goods.
26. Referring to Tribunal's order No. 221/87-B1 dated 8-4-1987 relied upon by the appellants, Smt. Zutshi submitted that this was prior to the amendment of Item 68, and therefore had no bearing on the present cases. Referring to the Delhi High Court judgment in the case of Khandelwal Metals and Engineering 1983 ECR 91D (Delhi) Smt. Zutshi drew attention to paras 29 e± seq. She submitted that in this judgment a very clear distinction had been drawn between waste and scrap on the one hand and dross and skimmings on the other. Referring to para 56 of the same judgment, wherein it had been held that aluminium scrap was not a refuse or throw-away, she submitted that aluminium dross and skimmings also were not refuse or throw-away. Referring to the findings in para 59 of the judgment, she submitted that the ratio of the Khandelwal judgment applied to the present cases, the more so since it had taken into account the judgment of the Bombay High Court in the case of Indian Aluminium Co. It was equally binding on the Tribunal and should be respected.
27. Smt. Zutshi then stated that she would argue on the following questions, namely:-
(1) whether aluminium dross and skimmings were goods;
(2) whether they were excisable goods; and (3) if so, from what date.
28. On the first question, she had already argued that they were goods. Elaborating this argument, she referred to the Tribunal's order No. 567/86-B1 dated 9-9-1986 in the case of Anam Electrical Manufacturing Co. (para 6 supra). Referring to the para 6 of the order, she submitted that dross and skimmings were not waste and scrap, but it did not follow that they were not goods. Referring to para 7, she submitted that no doubt dross and skimmings were different from prime metal, but this by itself would support the argument that they had their own character, use etc. The fact that they were sub-standard would not be a bar to the levy of duty.
29. At this stage the Bench enquired from Smt. Zutshi whether she was proposing to distinguish the two cases before the Bench, from the previous cases on aluminium dross and skimmings decided by the Tribunal and cited by the appellants, with reference to the period, wording of the tariff etc. Smt. Zutshi's reply to this question was not clear. A further question was asked whether the Department had filed appeals to the Supreme Court against the Tribunal's orders in those cases. Smt. Zutshi replied that she did not have this information, but could get it and inform the Bench about it the next day. The learned representatives of the appellants had no objection to this information being received after the hearing and taken into account. (Smt. Zutshi subsequently informed the Bench that the Revenue had filed appeals to the Supreme Court against the judgment of the Division Bench of the Bombay High Court in the case of Indian Aluminium Co. Ltd. and against the Tribunal's orders holding that aluminium dross and skimmings were not 'goods'.)
30. Smt. Zutshi then referred to the case of Super Tyres 1985 ECR 857 (CEGAT). She submitted that the dross and skimmings satisfied the tests laid down in this order. They were bought and sold. They were residual products. The order laid down that it was not only the particular goods included to be manufactured that could be taxed. In other words, whether any goods were intended to be manufactured or not was irrelevant. In the light of this order, dross and skimmings should be considered to be goods liable to duty.
31. As regards the reference, by Shri Daya Sagar to the Finance Minister's speech (para 11 supra) Smt. Zutshi submitted that such a speech could be referred to for ascertaining the intention of the Legislature if there was any doubt about the interpretation. However, the amendments to the tariff were very clear and there existed no doubt requiring a reference to the Finance Minister's speech.
32. Reference had been made to the Tribunal's order in the case of Addison and Company Ltd. (para 16 supra). It had been laid down in paras 19 and 20 of the order that the words of a statute were first understood in their natural, ordinary or popular sense. In the present cases the wording of the tariff was very clear. The question of applying Heydon's Rule did not arise where no two interpretations were possible.
33. With reference to the judgment in the case of Madhav Rao Scindia, Smt. Zutshi submitted that it was not relevant.
34. Smt. Zutshi submitted that it had been established that the dross and skimmings were goods and they were marketable, since they were actually marketed. Since they were specified in the First Schedule, they were also excisable goods. There could be no doubt that they were manufactured goods, having regard to the definition of "manufacture" in Section 2(f) of the Central Excises and Salt Act, because any process, even an incidental one, could amount to manufacture.
35. The next question would be under what item the goods were classifiable. T.I. 27 was obviously ruled out whether before or after its amendment. The alternative was Item 68, which was available from 1-3-1975. According to Smt. Zutshi, Item 68 was applicable even without the explanation to that item which was added in 198Q. The explanation was considered necessary only because of the judgment of the Gujarat High Court in the case of Darshan Hosiery Works.
36. Smt. Zutshi cited the judgment of the Supreme Court in the case of Union Carbide v. Union of India 1986 (7) ECR (SC). In para 6 of the judgment it had been held that in order to attract excise duty, the article manufactured must be capable of sale to customer. In that case it had been held that the aluminium cans were not saleable. In the present case however there was no doubt that the dross and skimmings were saleable and were actually sold.
37. Smt. Zutshi also cited the judgment of the Supreme Court in the case of Indian Aluminium Cables Ltd. v. Union of India and Ors. 1985 (21) ELT 3 (SC). In para 12 of the judgment it had been reaffirmed that words and expressions in the tariff schedule should be construed in the sense in which they are understood in the trade. However, it had also been observed that commercial parlance assumes importance when goods are marketable. In para 13 it had been held that the process of manufacture of a product and the end use to which it is put, cannot necessarily determine the classification of that product.
38. The Supreme Court, in the case of Geep Flashlight Industries Ltd. D985 (22) ELT 3 SC], had considered the classification of plastic torches. The Supreme Court had not accepted the very wide scope sought to be given to the specific Item 15A(2). It had been held that Item 68, which was intended to be the residuary item, was applicable.
39. In conclusion, Smt. Zutshi submitted that dross and skimmings were goods assessable under T.I. 68.
40. Replying on behalf of Indian Aluminium Co. Ltd., Shri N. Mookherjee submitted that he was relying heavily on the judgment of the Bombay High Court in the case of Indian Aluminium Co. and of the Delhi High Court in the case of Khandelwal Metals.
41. As regards the use of dross and skimmings, they could no doubt be used for the extraction of aluminium. However, if so used, the aluminium was exempt from duty, under Notification No. 43/75, No condition had been imposed regarding payment of duty on the dross and skimmings, because it was assumed that they would not have to pay any duty. On the other hand, aluminium obtained from waste and scrap was exempt from duty only if the waste and scrap was duty paid.
42. Shri Mookherjee supported the conclusion of the Bombay High Court that dross and skimmings were in the nature of rubbish. They were not generally available in the market.
43. It had been held by the Tribunal in the case of Collector of Central Excise, Patna v. Bihar Extrusion Co. Ltd. (para 6 supra) that dross and skimmings were not goods. That decision should be followed.
44. Replying on behalf of M/s Mysore Rolling Mills (P) Ltd., Shri Daya Sagar submitted that he had cited notifications to show that there has been no intention to levy duty on dross and skimmings. It had been held by the Supreme Court in the case of J.K. Steel Ltd. v. Union of India and Ors. (ECR C 281 SC) that for finding out the scope of a particular levy, exemption notifications could be looked into.
45. Shri Daya Sagar submitted that the fact of sale was not conclusive. The question was whether the substance ordinarily came to the market. Specialised purchases were not relevant. It was after taking into account the observations of the Supreme Court in the D.C.M. case regarding the definition of "manufacture" that the Bombay High Court had come to the conclusion that aluminium dross and skimmings were not goods.
46. The judgments of the Supreme Court in the case of Geep Flashlight Industries Ltd. and Union Carbide did not have any application to the present case.
47. At her request, Smt. Zutshi was permitted to reply briefly. She submitted that the learned representatives of the appellants had referred to certain notifications which they had not referred to at the earlier stage. According to her the exemption from duty granted to aluminium manufactured from dross and skimnings had no bearing on the excisability of the raw materials. She also submitted that the provisions of the new tariff or- the exemptions issued thereunder were not relevant to the present cases.
48. As regards the Tribunal's previous decisions cited on behalf of the appellants, Smt. Zutshi submitted that an authority could depart from a view taken earlier for cogent reasons. In this connection she relied on the judgment of the Delhi High Court in the case of J.K. Synthetics Ltd and Another v. Union of India and Ors. 1981 ELT 328 (Del.)
49. I have carefully considered the orders recorded by the two learned Members, as well as the arguments advanced before me by the learned representatives on both sides. The arguments were extensive, and some of them had only a distant bearing on the matter in issue. It will be sufficient to refer to the important points raised.
50. The strongest argument in favour of the appellants is that there is a specific decision of the Bombay High Court 1980 ELT 146 (Bom.) in a case relating to Indian Aluminium Co. Ltd., one of the two appellants, that aluminium dross and skimmings are not "goods", and therefore not excisable. This judgment, of a learned Single Judge, was upheld in appeal by the Division Bench of the Bombay High Court, which specifically stated that the reasons for dismissal of Government's appeal were its acceptance of the discussion as well as the ultimate conclusion of the learned Writ Judge.
51. There is also a series of decisions of Special Bench-B1 of the Tribunal, holding that aluminium dross and skimmings are not goods and are not excisable. Although these decisions were primarily based on the judgment of the Bombay High Court, they were reasoned orders, which dealt with practically all the arguments now advanced on behalf of the Revenue.
52. Smt. Zutshi had argued that the decision of the Bombay High Court had been in the context where aluminium dross and skimmings were "finished excisable goods", and that the decision would not be an authority to contend that they were not "goods" simpliciter.
53. Certain observations to the same effect have been made by the learned Member Shri Rekhi in para 6 of his order in the case of Indian Aluminium Co. Ltd.
54. With great respect to the learned Member and to the learned SDR, I am unable to agree with this interpretation of the judgment in the case of Indian Aluminium Co. Ltd. [180 ELT 146 (Bom.)l In para 21 of the judgment, the learned Single Judge had observed that the proviso to Rule 36A(2) contained conditions, namely "(a) material is used in manufacture; (b) such manufacture is of goods; (c) such goods are finished excisable goods and (d) such finished excisable goods are either exempt from the whole of the duty of excise leviable thereon or are chargeable to "nil" rate of duty." In the succeeding paragraphs he examined whether each of the 4 conditions had been fulfilled. In paras 22 to 24 the discussed at length whether dross and skimmings were "goods", and, after referring to the leading case of D.C.M. in the Supreme Court, he negatived the contention that the dross and skimmings were goods. In the later part of para 24 he held that the other conditions were also not satisfied. His summing up is contained in para 25, which reads as follows:-
"25. Thus none of the requirements of this proviso can be said to have been complied with so as to bring the case of the department within its ambit. In these circumstances, the contention urged on behalf of the petitioners that the proviso has no application whatsoever must be upheld."
It would be clear from the above the Bombay High Court had examined not only the question whether aluminium dross and skimmings were "finished excisable goods", but also 3 other questions, including the one material to the present cases, namely, whether aluminium dross and skimmings were "goods" for the purpose of Central Excises and Salt Act. The High Court had clearly held that aluminium dross and skimmings were not goods. And this was in a case relating to one of the two appellants here. The conclusions of the learned Single Judge have been upheld by the Division Bench of the same Hon'ble High Court. It would not be proper or correct to ignore the decision of the Bombay High Court as not relevant to these cases.
55. The appellants have also placed strong reliance on a series of orders passed by Special Bench-B1 of this Tribunal, holding that aluminium dross and skimmings were not goods and were not excisable. These decisions also have to be given due respect. Smt. Zutshi appeared to argue that the present Bench was free to take a different view. In this connection she was asked whether she proposed to distinguish the two cases before this Bench from the earlier ones which had been decided against the Revenue. Although Smt. Zutshi stated that the amendment to T.I. 27 was material, she did not seek to differentiate the present cases from those decided earlier, with reference to the date of the amendment.
56. Smt. Zutshi referred to the judgment of the Delhi High Court in the case of 3.K. Synthetics Ltd and Another v. Union of India and Ors. 1981 ELT 328 (Del.), Basing herself on this decision, she submitted that an authority could for cogent reasons depart from a view taken earlier. What the Hon'ble Delhi High Court observed in that case was that the Department should not be permitted to take different stands unless there is any good or cogent reason for the change in view. This has been explained in para 15 of the judgment as follows:-
"For example if the facts are different or if further and fresh facts are brought on record or if the process of manufacture has changed or if the relevant entries in the tariff have undergone a modification or if, subsequent to the earlier decision there has been the pronouncement of a High Court of the Supreme Court which necessitates reconsideration of the issue, it can hardly be doubted that the department can take a different view and have the matter agitated right upto the Supreme Court, if necessary."
In the present cases however, the "cogent reason" merely amount to saying that the Bombay High Court and the Tribunal had taken a wrong view of the law.
57. No doubt an attempt has been made to differentiate the cases on the basis of a change in the law. In this connection reference has been made to the amendment of T.I. 68 in 1980. There is no dispute that this amendment was made in view of the judgment of the Gujarat High Court in the case of Darshan Hosiery Works. The effect of this amendment has been explained in para 7 of the Tribunal's order in the case of Collector of Central Excise, Patna v. Bihar Extrusion Co. Ltd., Oamshedpur (vide para 6 supra). To put it simply, the explanation which was added in 1980 made it clear that because a certain article was specifically excluded from a tariff item, it was not automatically excluded from T.I. 68, on the ground that it had been "elsewhere specified". It did not mean that something excluded from an earlier item was necessarily included within T.I. 68. Yet that is how the Revenue seems to view the matter.
58. Smt. Zutshi also referred to the amendment made in 1981 to T.I. 27 by adding an Explanation defining 'waste and scrap'. This explanation stated categorically that 'waste and scrap' did not include dross and skimmings. It has not been contended (and could not be) that (the effect of the explanation was to bring dross and skimmings within! the scope of T.I. 27 (vide para 35 supra). Nor, as explained above, could this amendment have the effect of pushing aluminium dross and skimmings into T.I. 68. It cannot therefore be said that there was a cogent reason in the shape of a change in the law which would justify a departure from the view of the law taken by the Hon'ble Bombay High Court, and by the Tribunal, following the Hon'ble High Court.
59. Reference was also made to the decisions of the Delhi High Court and the Supreme Court in the case of Khandelwal Metal and Engineering Works. It is true that in that case both the Delhi High Court and the Supreme Court had held that brass waste and scrap were liable to additional customs duty. I do not, however think that it would be proper to rely on the general observations of the Hon'ble Supreme Court in this case or in the other cases- cited by Smt. Zutshi (vide paras 36 to 36 supra) as overruling the specific decision of the Bombay High Court in the case of aluminium dross and skimmings.
60. The Tribunal is bound to follow the decision of the Hon'ble Bombay High Court in regard to aluminium dross and skimmings, which is directly on the point at issue in these cases. It is also, in the absence of any cogent reason to the contrary, bound to follow its own -previous decisions in regard to the same material. As mentioned above (vide para 29 supra) Smt. Zutshi informed the Bench after the hearing that the Department had filed appeals to the Hon'ble Supreme Court against the judgment of the Division Bench of the Bombay High Court as well as against the earlier orders of the Tribunal itself in regard to aluminium dross and skimmings. In the absence of a decision from the Hon'ble Supreme Court, the present position of the law is that aluminium dross and skimmings are not goods and therefore not excisable.
61. Since the above conclusion is sufficient to dispose of the point of difference referred to me, it is not necessary for me to go into the various other points raised by both sides. Nor is it necessary for me to discuss the question from first principles. It is however of interest to find that some observations which are very relevant to the present cases have been made by the Hon'ble Delhi High Court in its judgment dated 8-12-1986 in the case of Modi Rubber Ltd. and Another v. Union of India and Ors. 1987 (29) ELT 502 (Del.). In that judgment the Delhi High Court has referred with approval to the judgment of the Bombay High Court in the case of Indian Aluminium Co. Ltd. v. A.K. Bandyopadhyay and Ors.. In its judgment the Hon'ble Delhi High Court has examined the scheme of the Central Excise Rules to show that not all waste material is dutiable. In this connection specific reference has been made to Rule 50. The Delhi High Court has also observed "It is the common case that waste/scrap are capable of fetching some sale price but that cannot be the criterion for the event of manufacture". The conclusion, as succinctly stated by the Hon'ble Delhi High Court, is that "if the intention of the Legislature is to cover 'waste or scrap' arising in or in relation to a manufacture, then it has been specifically provided in the tariff items". This judgment is of special interest in view of the fact that it is subsequent to the judgment of the Hon'ble Supreme Court in the case of Khandelwal Metal Engineering Works, and also that it has been delivered by the Delhi High Court, which at the High Court level had decided the case of Khandelwal Metal Engineering Works.
62. In the result, having regard to the present state of the law, I would answer in the negative the question posed to me, namely, whether aluminium dross and skimmings were "goods" or not.
63. These two cases should now go back to the original Bench for final orders in the light of the above decision on the point of difference.