1995 (4) TMI 62 - SC - Central Excise

Aluminium dross and skimmings are refuse from manufacture, not marketable goods or waste under Tariff Item 68

UNION OF INDIA Versus INDIAN ALUMINIUM CO. LTD.

SC held that aluminium dross and skimmings are not marketable goods or commercial waste/scrap but refuse arising during manufacture, and thus are not ... Marketability of aluminium dross and skimmings - raw material obtained from outside - Exigibility of aluminium dross and skimmings to excise duty by reason of Item 68 and its Explanation read with the Explanation to Item 27. Held that:- It is contended by the appellants that the Explanation to Item 27 makes it clear that dross and skimmings are not included in the item 'Waste and Scrap of Aluminium'. Since these are expressly excluded from Item 27, these must be included in Item 68 as the Explanation to Item 68 makes it clear that goods which are referred to in any preceding Item in the Schedule for the purpose of excluding them from the description of goods in that Item, will have to be included in Item 68. It is not possible to consider aluminium dross and skimmings as 'goods' or as a commercial and marketable commodity. Dross and skimmings are merely refuse or ashes given out in the course of manufacture, in the process of removing impurities from the raw material. This refuse is quite different from waste and scrap which is prime metal in its own right. The Explanation to Item 27 is not for the purpose of separating certain types of wastes and scrap from the main Item of 'Waste and Scrap of aluminium' and thus making it exigible to tax under Item 68. The Explanation to Item 27 merely excludes from waste and scrap certain residues or rubbish which cannot be categorised as 'goods'at all. It is only those goods, which are otherwise liable to be included in a given Tariff Item, but are expressly excluded from it, which fall under the residuary Tariff Item 68. The exclusion of aluminium dross and skimmings from 'Waste and Scrap of Aluminium' in Tariff Item 27 is not of this nature. Dross and skimmings are excluded because they are not even waste or scrap. They are not goods at all as understood in commercial parlance. Therefore, they are not assessable under Tariff Item 68. Appeals fail and are dismissed Issues Involved:1. Exigibility of aluminium dross and skimmings to excise duty.2. Applicability of Rule 56A of the Central Excise Rules, 1944.3. Interpretation of 'excisable goods' under the Central Excises and Salt Act, 1944.4. Marketability of aluminium dross and skimmings.5. Application of Tariff Item 27 and Tariff Item 68.Detailed Analysis:1. Exigibility of Aluminium Dross and Skimmings to Excise Duty:The primary issue was whether aluminium dross and skimmings, which arise during the manufacturing process of aluminium products, are subject to excise duty. The court observed that aluminium dross and skimmings are not covered under Tariff Item 27 as it stood at the relevant time, nor were they included in Tariff Item 68, which was introduced later. It was concluded that aluminium dross and skimmings were not excisable goods at the relevant time.2. Applicability of Rule 56A of the Central Excise Rules, 1944:The assessees followed Rule 56A, which allows credit for duty paid on raw materials used in manufacturing excisable goods. The department issued a show cause notice arguing that since aluminium dross and skimmings were exempt from duty, credit should not be allowed for the portion of aluminium ingots resulting in their manufacture. The court rejected this argument, stating that aluminium dross and skimmings are not excisable goods and hence, the proviso to Rule 56A was not applicable.3. Interpretation of 'Excisable Goods' under the Central Excises and Salt Act, 1944:Under Section 3 of the Act, excise duty is levied on 'excisable goods' produced or manufactured in India. 'Excisable goods' are defined in Section 2(d) as goods specified in the First Schedule. Since aluminium dross and skimmings were not specified in the First Schedule, they did not qualify as excisable goods.4. Marketability of Aluminium Dross and Skimmings:The court examined whether aluminium dross and skimmings could be considered marketable commodities. It was noted that although these by-products could be sold, they are essentially waste or rubbish with no significant commercial value. The court emphasized that not everything sold is necessarily a marketable commodity as known to commerce. Therefore, aluminium dross and skimmings could not be considered marketable goods.5. Application of Tariff Item 27 and Tariff Item 68:For subsequent periods, the court considered changes in the Excise Tariff, including the introduction of an explanation to Tariff Item 27 and the introduction of Tariff Item 68. The explanation to Item 27 excluded dross and skimmings from the definition of 'waste and scrap of aluminium.' The court held that these exclusions did not imply that dross and skimmings were included in Item 68, as they were not goods at all in commercial parlance. The court distinguished between items excluded for correct assessment and those excluded because they are not goods.Conclusion:The court upheld the decision of the learned Single Judge of the Bombay High Court, concluding that aluminium dross and skimmings are not excisable goods and are not marketable commodities. Consequently, the appeals were dismissed with costs.