2006 (3) TMI 307 - SC - Central Excise

Supreme Court affirms classification of HR coil pieces under Heading 72.16, not waste. Duty rates upheld.

COMMISSIONER OF CENTRAL EXCISE Versus BHUSHAN STEELS AND STRIPS LTD.

The Supreme Court upheld the Tribunal's decision to classify side slittings, cuttings, and roughly shaped pieces of HR coils under Heading 72.16 instead ... Iron and steel - cuttings and trimmings- the issue of classification of iron and steel products, namely, side slitting, cuttings, roughly shaped pieces and trimmings under the Schedule to the, Central Excise Tariff Act has been decided against the Revenue, whereas the second set of appeals being CAs Nos. 4371-72 of 2003 impugns Final Orders Nos. 420-21 passed by the Tribunal dated 11-9-2002 in Appeals Nos. 1578-79 of 2002-B for a later period. The Tribunal following its earlier order dated 16-6-2000 in the first batch of appeals has rejected these appeals. Held that- Tribunal order classifying side slitting, end cutting and other under heading 7216 as usable off cuts of different shapes and sizes sustainable. Issues Involved:1. Classification of side slittings, cuttings, roughly shaped pieces, and trimmings of HR/CR coils.2. Determination of appropriate tariff heading under the Central Excise Tariff Act.3. Applicability of duty rates.4. Refund of duty as a consequence of reclassification.Issue-wise Detailed Analysis:1. Classification of Side Slittings, Cuttings, Roughly Shaped Pieces, and Trimmings:The primary issue in these appeals is the correct classification of side offcuts of HR coils. The assessee classified these as 'waste and scrap' under Tariff Entry 72.04, while the Revenue classified them as 'flat-rolled products' under Tariff Entries 72.08, 72.09, and 72.11. The Tribunal, following its earlier order, rejected the Revenue's classification and maintained the classification as 'waste and scrap.'2. Determination of Appropriate Tariff Heading:The Tribunal referenced the definition of 'waste and scrap' in Chapter 72 of the Tariff Act, which excludes articles that can be reused or refashioned into other goods without first being recovered as metal. The Tribunal concluded that the disputed items (side slittings, end cuttings, roughly-shaped pieces, and trimmings) do not fall under Heading 72.04 as they are 'usable as such' and therefore cannot be classified as 'waste and scrap.' Instead, these items should be classified under Heading 72.16, as they are offcuts of different shapes and sizes.3. Applicability of Duty Rates:The Assistant Commissioner initially confirmed a partial demand for duty, holding some side trimmings as waste and scrap while rejecting the Revenue's contention that trimmings between 10 mm and 45 mm should be subject to a higher rate of duty. The Tribunal upheld this decision, noting the absence of evidence from the Revenue to prove that trimmings of 45 mm width were being reused for other purposes. The Tribunal's decision was based on the precedent set in L.M.L Ltd. v. CCE, where it was held that offcuts used for purposes other than recovery of metal or manufacture of chemicals do not qualify as 'waste and scrap.'4. Refund of Duty:The Supreme Court confirmed the Tribunal's classification and held that any refund of duty payable as a result of this order should be processed in accordance with the Constitution Bench judgment in Mafatlal Industries Ltd. v. Union of India. The appeals were allowed to the extent indicated, with no costs imposed.Conclusion:The Tribunal's decision to classify the disputed items under Heading 72.16 was upheld by the Supreme Court. The items in question were deemed not to fall under the 'waste and scrap' category of Heading 72.04, nor under the flat-rolled products categories of Headings 72.08, 72.09, and 72.11. The Supreme Court confirmed that the side slittings, end cuttings, and roughly-shaped pieces should be classified under Heading 72.16 due to their usability and different shapes and sizes. The Tribunal's finding that no penalty was imposable was also confirmed, and the refund of duty was to be handled as per the Mafatlal Industries judgment.