Customs, Excise and Gold Tribunal - Delhi
Aravali Ispat Ltd. vs Collector Of Central Excise on 5 September, 1986
Equivalent citations: 1986(10)ECC212, 1986ECR516(TRI.-DELHI), 1986(26)ELT259(TRI-DEL)
ORDER P.C. Jain, Member (T)
1. The adjudicating authority has demanded duty of Rs.18711/- and has imposed a penalty of Rs.250/- on the ground that the appellant has availed of benefit of notification 208/83 dated 1.8.83 in the manufacture of iron castings. It has been stated that the said notification gives the benefit of duty on iron casting if it is made out of raw materials specified in the notification alone. The raw materials mentioned in the notification do not include M.S. Scrap which has also been used by the appellant in the manufacture of the said iron castings. It has further been stated by the adjudicating authority that the addition of steel scrap in the list of raw materials was made by amendment of the said notification w.e.f. 1.3.84. vide notification 38/84.
2. On the other hand, learned consultant has submitted that the major raw material used in the manufacture of iron castings is old iron scrap which is mentioned in the list of raw materials in notification 208/83. Addition of 20 to 30% of steel scrap is used only to improve the physical properties of the final product, namely iron castings. Addition to' this small percentage of steel scrap does not change the essential character of the raw mateial which remains old iron scrap since the latter scrap is in predominant quantity in the total admixture. He also pointed out that apart from steel scrap very small quantity of carbon and ferro alloys are also added. If the intention of the notification had been to allow only iron scrap in the manufacture of iron castings then even the use of carbon ferro alloys would not be permitted for the benefit of the said notification. Intention has been clearly spelt out by the Government in a circular No. l38/8/81-CX.IV dated 24.2.82 (Anne-xure 'E' to the appeal) of the Government wherein it has been laid down that use of other metals by way of technologocal necessity in the manufacture of metals falling under Items 25, 26, 26A, 26AA, 26B, 27 and 27A will not disentitle a manufacturer from any notification on the lines of notification 119/66 dated 16.7.66 in respect of copper and copper alloys. The learned consultant also pointed out that the final product still remains iron casting despite the use of steel scrap to the extent 20 to 30% and that has not been denied by the adjudicating authority. Subsequent amendment to notification 208/83 by notification 38/84 dated 1.3.84 can be said to be of clarificatory nature or enlarging the scope of earlier notification to the extent that iron castings falling under Tariff Item 25 (16) (i) would be exempted from duty, even if it is manufactured wholly out of steel scrap falling under Item 25 (3) (ii) the amending notification 38/84 dated 1.3.84 does not take away the effect of the earlier notification where iron castings were manufactured out of raw material predominantly consisting of iron scrap falling under Item 25 (3) (i).
Apart from the foregoing plea, the learned consultant also submitted that the demand would be partly time barred as it has been raised after six months and it was known to the department that they had been manufacturing iron castings using M.S. scrap as well on the basis of earlier notification 64/72. Further, he submitted that there was no case for imposition of penalty as the learned adjudicating authority has itself admitted that the matter was not free from doubt and in view of the ambiguity the amending notification 38/84 dated 1.3.84 was issued.
3. Learned SDR merely reiterated the grounds taken by the adjudicating authority in the impugned order.
4. We have carefully considered the pleas on both sides. We find substantial force in the appellant's plea. Notification 208/83 dated 1.8.83 as it stood before 1.3.84 did not spell out that the iron castings falling under Tariff Item 25 (16) (i) should be manufactured exclusively out of raw materials stated in correspoending entry of col. 2 of the table of that notification. Character of the admixture used for the manufacture of iron castings still remains the scrap of iron or pig iron falling under Tariff Item 25 (3) (i) or 25 (i). The circular of the Government quoted by the learned consultant supports his plea for availment of the said notification.
Adjudicating authority's' observation that the circular cannot override the provisions of the notification is no doubt correct but ignores the predo-minent character of the admixture used for the final product. Notification 208/83 does not stipulate that the final product must be manufactured wholly or entirely or exclusively out of the raw materials mentioned in col. 2 of the corresponding entry of the table to the said notification. In the absence of these words finding of the adjudicating authority is not tenable in law. We are fortified in this view by Supreme Court's in the case of Union of India and Ors. v. Tata Iron & Steel Company Ltd., Jamshedpur - 1977 ELT (J61) (S.C.). Supreme Court's observations are as follows:
"If the intention of the Government were to exclude the exemption to duty paid pig iron when mixed with other materials then the notification would have used the expression 'only' or 'exclusively' or 'entirely' with regard to duty paid iron".
Notification under interpretation before the Supreme Court was 30/60 which
5. In view of our aforesaid findings it is unnecessary to go into the other pleas raised by the learned consultant of the appellant in respect of time bar and imposition of penalty. The appeal succeeds on the basis of our finding on the first plea itself. The impugned order is set aside and the appeal is allowed.