Steel melting scrap exemption denied and excise penalty upheld where goods were not re-rollable scrap.

Products rolled out of steel melting scrap did not qualify for exemption under Notification No. 206/63 because the input was treated as steel melting scrap under Item 26 of the Central Excise Tariff, not as fresh and unused re-rollable scrap under Item 25. The exemption claim therefore failed. Since the goods were found outside the category relied upon by the assessee, contravention of Rule 52A and Rule 173G was established on the record, and the penalty was upheld as lawful. The order-in-appeal was affirmed and the revision application rejected.

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Issues: (i) whether products rolled out of steel melting scrap were entitled to exemption under Notification No. 206/63 dated 30-11-1963; (ii) whether the contravention of the excise rules and the penalty were sustainable.

Issue (i): entitlement to exemption under Notification No. 206/63 depended on the proper characterisation of the input material. Risers were treated as steel melting scrap falling under Item 26 of the Central Excise Tariff and not as fresh and un-used re-rollable scrap under Item 25. On that basis, the products manufactured from such scrap did not qualify for the claimed exemption.

Conclusion: the exemption claim failed and was held against the assessee.

Issue (ii): once the goods were found to be distinct from the category relied upon by the petitioners, the record supported the finding that Rule 52A and Rule 173G were contravened. The penalty order was therefore upheld as being in accordance with law.

Conclusion: the penalty was sustained and was held against the assessee.

Final Conclusion: the order-in-appeal was affirmed and the revision application was rejected.

Ratio Decidendi: goods classified as steel melting scrap and not as re-rollable scrap cannot claim an exemption meant for the latter category, and established contravention of the excise rules supports affirmance of the penalty.

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