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Issues: Whether old and used lead acid batteries removed from ships during ship breaking were classifiable under Chapter 78 as lead scrap or under Chapter 85 as batteries, and whether Note 9 to Section XV of the Central Excise Tariff Act, 1985 applied so as to treat their removal as manufacture and attract central excise duty.
Analysis: Lead acid batteries are separately specified under Chapter 85 of the Central Excise Tariff Act, 1985, whereas Chapter 78 covers lead and articles thereof, including lead waste and scrap. The deeming provision in Note 9 to Section XV applies where goods and materials are obtained by breaking up ships, boats and other floating structures and are products falling within that Section. On the facts found, the items cleared by the appellant were batteries as such, not lead waste or lead scrap arising after processing. Classification has to be determined in the form in which goods are cleared, not by reference to their post-clearance end use or possible recycling by the buyer. Since the goods were not shown to have become lead scrap at the appellant's end, the statutory deeming fiction for manufacture was inapplicable.
Conclusion: Old and used lead acid batteries were held classifiable under Chapter 85 and not under Chapter 78. The goods did not amount to manufacture under Note 9 to Section XV and were not liable to central excise duty. The appeal was allowed and the demand, interest and penalty were set aside.
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