Mill-scale classification as scrap, not iron oxide, led to invalid duty demand and penalty in excise dispute.

Mill-scale generated incidentally in the hot rolling process was examined for classification under Tariff Item 68, with the dispute turning on whether it was iron oxide or iron and steel scrap. The chemical examiner's report was excluded because its copy had not been supplied and no due supply was shown. On the remaining material, the record indicated that mill-scale was treated as scrap and exported through Metal Scrap Trading Corporation, supporting classification as scrap rather than a separately classifiable oxide. On that basis, the duty demand and penalty were unsustainable and consequential refund followed.

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Issues: Whether mill-scale arising during the hot rolling process was classifiable as iron oxide under Tariff Item 68 of the Central Excise Tariff, and whether the duty demand and penalty were sustainable.

Analysis: The chemical examiner's report could not be relied upon because its copy had not been supplied to the appellants and there was no material showing due supply. Once that report was excluded, the remaining record showed that mill-scale arose incidentally during manufacture of iron and steel products and was exported through the Metal Scrap Trading Corporation, indicating that it was in substance iron or steel scrap rather than a separately classifiable iron oxide. The surrounding material also supported the view that the Government itself treated mill-scale as scrap.

Conclusion: Mill-scale was not correctly classified under Tariff Item 68, and the demand of duty and penalty were unsustainable. The appeal was allowed and consequential refund followed in favour of the appellants.

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