Excisable scrap valuation and limitation: recovered iron scrap was dutyable, suppression invoked extended limitation, and valuation was remanded.

Iron scrap recovered from a slag dump yard was treated as excisable goods because it was found to be iron scrap arising in the course of manufacture and fitting the statutory definition of scrap under Section XV; classification under Chapter 72 was upheld, not as slag waste under Chapter 26. Non-filing of price and sales-pattern declarations was treated as wilful suppression and misdeclaration, so the extended limitation period and penalties were held applicable. On valuation, the tender price was found not to reflect the correct assessable value because of in-factory facilities provided without separate charge, and the comparable-goods method was rejected. The matter was remanded for redetermination under the correct valuation rule.

---

---

Issues: (i) Whether the iron scrap recovered from the slag dump yard was excisable and classifiable under Chapter 72 or as slag waste under Chapter 26; (ii) Whether the extended period of limitation and penalties were invocable; (iii) What was the correct method of valuation for the disputed scrap.

Issue (i): Whether the iron scrap recovered from the slag dump yard was excisable and classifiable under Chapter 72 or as slag waste under Chapter 26.

Analysis: The recovered material was found to be iron scrap, not slag, and it arose in the course of manufacture of iron from iron ore. Since the tenders themselves showed recovery and clearance of iron scrap from the factory, the material answered the statutory definition of scrap under Note 8 of Section XV. The authorities relied upon by the assessee concerning slag and dross were held inapplicable on the facts.

Conclusion: The goods were held to be excisable iron scrap correctly classifiable under sub-heading 7204.10 of the Central Excise Tariff Act, 1985.

Issue (ii): Whether the extended period of limitation and penalties were invocable.

Analysis: The assessee did not file the required price declarations and sales-pattern declarations, though it was aware that the declared contract price did not reflect the normal assessable value and that comparable scrap was being cleared elsewhere in the plant. The omission was treated as wilful suppression and misdeclaration with intent to evade duty.

Conclusion: The extended period of limitation was rightly invoked and the penalty provisions were attracted.

Issue (iii): What was the correct method of valuation for the disputed scrap.

Analysis: The price charged under the tender did not represent the correct assessable value because the buyer was permitted to use machinery, labour, weighbridge and other facilities within the factory without separate charge. However, Rule 5 did not apply because the goods were not sold in the normal situation contemplated by Section 4(1)(a), and Rule 6(b)(i) was inapplicable because the goods were sold to an independent buyer and not used or consumed by the assessee. The valuation adopted by the Commissioner on the basis of comparable C.I. skull scrap with a 15% abatement was also found unsupported by objective basis.

Conclusion: The valuation was set aside and the matter was remanded for redetermination under Rule 7 of the Central Excise Valuation Rules, 1975.

Final Conclusion: The liability of the disputed scrap to excise duty was upheld, but the assessable value and consequential duty and penalty were required to be reconsidered on remand under the correct valuation rule.

Ratio Decidendi: Scrap recovered and cleared from a factory in the course of manufacture is excisable where it is in substance iron scrap arising from production, and valuation must be determined under the rule applicable to the actual mode of sale and not by an inapplicable comparable-goods method.

---