Concessional customs benefit for melting scrap extends to practical use in an electric arc furnace through steel manufacture.

Melting scrap of iron or steel imported for use in an electric arc furnace was held to satisfy Notification No. 20/1999-Cus. where the evidence showed substantial direct charging into the furnace and the remainder first used in a basic oxygen furnace before being transferred into the electric arc furnace as part of steel manufacture. The phrase "for use" was read in a practical sense to include both direct and necessarily channelled indirect use, and there being no allegation of diversion, the end use certificate could not be rejected. The customs demand was therefore unsustainable.

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Issues: Whether melting scrap of iron or steel imported for use in an electric arc furnace could be denied the benefit of Notification No. 20/1999-Cus. merely because part of the scrap was first charged into a basic oxygen furnace as a coolant and later fed into the electric arc furnace, and whether the consequent denial of the end use certificate and customs demand were sustainable.

Analysis: The notification granted concessional duty to melting scrap of iron or steel for use in an electric arc furnace, induction furnace or hot blast cupola, subject to proof of such use. The evidence showed that a substantial portion of the scrap was directly charged into the electric arc furnace, while the balance was first used in the basic oxygen furnace and then transferred with the molten metal into the electric arc furnace for further processing. The expression "for use" was applied in a practical sense, covering not only direct use but also use that is ultimately and necessarily channelled into the notified furnace through the manufacturing process. There was no allegation of diversion or of use in any process unrelated to steel manufacture.

Conclusion: The imported melting scrap qualified for the concessional benefit under Notification No. 20/1999-Cus. both for direct and indirect use in the electric arc furnace. The rejection of the end use certificate and the customs demands were unsustainable.

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