TaxTMI 
TaxTMI 
1994 (10) TMI 165
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....ng, plant and machinery under Rule 173Q(2) but however, has granted redemption on payment of a fine of Rs. one lakh. The facts of this case are that a show cause notice dated 31-12-1988 was issued to the appellant and two others namely M/s. Precimex Engineers and M/s. Proficient Die Maker, Pune. It is alleged in the show cause notice that the appellant procured the excisable goods vis. MS sheets on which appropriate duty of excise or additional duty under Section 3 of Customs Act, 1962 have been discharged. They had declared these goods as their inputs under Rule 57G(1) of Central Excise Rules, 1944 to be used in the manufacture of their products (vis. Motor Vehicle and components thereof) for the purpose of Rule 57A in order to avail the credit of duty paid on the said inputs as per the procedure prescribed under the said Rule. It is alleged that they had removed part of the said inputs for home consumption declaring it as "Waste" arising from the processing of inputs after discharging the duty on the said inputs in the manner as provided under sub-rule (4) of Rule 57F, although they were liable to pay duty on such inputs in the manner as provided under Rule 57F(i)(ii). It is alle....
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.... duly procured by them under Rule 57A, in the form of MS Sheets of irregular dimensions, Circles, patties/strips, all retaining the essential characters of Sheets, as "MS Waste and Scrap" by misusing the provisions of Rule 57F(4). (II) While disposing such inputs in the manner stated above, M/s. Bajaj Auto Ltd., Akurdi, Pune have not discharged full duty liability on the said goods in terms of Rule 57F(i)(ii) i.e. duty payable to the extent of Credit availed or the appropriate rate applicable to the said goods. The term "Waste and Scrap" has been defined under the Central Excise Tariff Act, 1985 effective from 1-3-1986 and incorporated under Section XV Chapter 72 of the Central Excise Tariff Act. The Note 1(ix) to Chapter 72 defines "Waste & Scrap of base metals" as under : "Waste and Scrap of Iron or steel fit only for the recovery of metal or for use in the manufacture of chemicals, but does not include slag, ash and other residues". This definition, effective from 1-3-1986, underwent minor change with effect from 1-3-1988. The revised definition applicable with effect from 1-3-1988 onwards is contained in Section Notes 6(a) to Section XV of the Central Excise....
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....Strips for manufacture of various small parts. On further enquiry with various Vendors of M/s. Bajaj Auto Ltd., Akurdi, it is observed that they have received such letters and have also received such type of material for making the components/parts out of it for M/s. Bajaj Auto Ltd., Akurdi, Pune. The fact that the said material is not scrap but usable input for manufacture of small press-parts has been accepted by the various concerned Personnel of M/s. Bajaj Auto Ltd., Akurdi, Pune in their respective statements recorded in this behalf. It is also observed that such type of letters have been issued periodically by M/s. Bajaj Auto Ltd., Akurdi, Pune to almost all their Vendors/Job Workers". The annexure summarises the statement of various persons from whom the department has recorded in para 5 of the show cause annexure. The department admits that there are instances where scrap, such as M.S. turning and boring has genuinely gone for re-melting. In para 9 of the annexure, it is alleged that the evidence brought on record lead to the conclusion that the assessee has been indulging in the illicit practices, with due knowledge of law and procedures, in removing the inputs or porti....
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....llector of Central Excise, Aurangabad has confirmed a demand of Rs. 53,94,522/- under the proviso to Section 11A(1) of the Central Excises & Salt Act, 1944. He has also imposed a penalty of Rs. 5 lakhs under Rule 173Q of Central Excise Rules, 1944. The department has alleged that the assessee, manufacturers of Motor Vehicles and components thereof were processing the raw-material vis. M.S. Sheets falling under sub-heading 7212.32 upto 29-2-1988 and under 7209.20 from 1-3-1988 onwards, on which appropriate duty of excise and/or additional duty under Section 3 of Customs Act, 1962 had been paid. They had declared the said M.S. Sheets as their inputs under Rule 57G(1) of Central Excise Rules, 1944, to be used in the manufacture of motor vehicles and components thereof for the purpose of Rule 57A in order to avail the credit of duty paid on the said inputs. It is alleged in the show cause notice dated 20-9-1989 issued to the appellants and 12 others that they had removed part of the said goods for home consumption declared it as "Waste and Scrap" arising from the process of said inputs after discharging the duty liability @ Rs. 365/- per M.T. upto 28-2-1989 and thereafter @ Rs. 500/- p....
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.... the various press components manufactured by the aforesaid factories out of the raw materials/inputs viz. pieces of CRCA Sheets were also drawn under regular panchnama. The statements of various functionaries of the assessee and the statement of scrap dealers and vendors/job workers of the assessee were recorded under Section 14 of the Central Excises & Salt Act, 1944. In view of the investigations carried out and evidence collected (details mentioned in the show cause notice) it was alleged that the major portion of inputs so cleared by the assessee as "Waste and Scrap", as defined under the Central Excise Tariff in as much as the so-called scrap cleared was neither fit for recovery of metal nor sent any time for the said purpose but actually used as such for further manufacture of parts/components. Therefore, it was alleged that the assessee and its functionaries had contravened the provisions of the Central Excises & Salt Act, 1944 and rules made thereunder and thus has evaded Central Excise duty to the extent of Rs. 53,94,522/- during the period 1-3-1986 to 31-5-1989. 4. The assessee filed reply vide letter dated 9-2-1992 in which they submitted that for the m....
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....ontinued to be the same throughout, but the department was aware of the said position. They had submitted that w.e.f. 1-3-1986 Modvat Rules were introduced and that the appellant for its Akurdi Works and also for its Waluj Works, filed declaration under Rule 57G, obtained dated acknowledgments and on getting the approval under 57F(2) they cleared the processing waste and in respect of clearances under Rule 57F(4) duty was paid on Iron and Steel waste and scrap; that once again the Supdt. Central Excise Akurdi had issued show cause notice alleging contravention of Rule 9(1) and 173(2) read with Rule 52A alleging that they had not paid duty on scrap inter alia of Iron and Steel generated during the course of manufacture of finished excisable goods and had demanded duty for the period from 1-3-1986 to 21-2-1987; that after considering the cause shown the Assistant Collector vide his order dated 30-11-1987 had confirmed that the assessee had paid duty correctly on the processing waste. Therefore, they had filed classification lists in respect of waste and scrap being generated in the course of manufacturing of vehicles to both the Collectorates, which had been approved by the jurisd....
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....s `Waste' as claimed by the department then Rule 57F(4) at once became redundant. They had submitted that the tariff entries or tariff definition could not be of any relevance to the modvat rules which were independent and self contained and occupy the entire field. 5.We reproduce herein below the findings given by the Collector in E.A. No. 2346/93-B1 and Appeal No. E/2259/93-B1. In the case of E/2346/93-B1, the Collector had raised two issues whether : (i)It was in the form of original inputs like steel sheets procured under Rule 57-A or have retained the character of said inputs at the stage of removal as held in the investigation and (ii) It was in the form of "Waste and Scrape" of steel generated in the process and eligible to be removed under the procedure laid down under Rule 57F(i)(ii) read with Rule 57F(4), as claimed by the party. The ld. Collector after referring to the definition of "Waste and Scrap" for the relevant period as appearing in Chapter Note XVI has held that "Wa ste and Scrap of metal is only that type of scrap which is fit for recovery of metal. The samples shown to me did not show that they were melting scrap and therefore, the party ....
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....y through investigation of the case, true nature of the product came to notice. Hence, Rule 9 is rightly invoked in the show cause notice and larger period is clearly attracted. 6. E/2259/93-B1 : The ld. Collector has referred to the Book "The Making, Shaping and Treating of Steel" published by United States Steel which was produced by the appellants for perusal. The Collector has also referred the result of cross-examination, then to the various witnesses of the appellants. On the basis of this evidence, he has drawn the following questions : (i) whether the so-called waste and scrap cleared by party was in the form of original inputs like steel sheets/CRCA sheets procured for which Modvat credit taken under Rule 57A or have retained the said inputs at the stage of removals as alleged in the show cause notice. (ii) whether the said waste and scrap of steel sheets cleared was in the nature of partially processed goods or capable of manufacture of an intermediate products. (iii) whether the said waste and scrap of steel sheets generated in the process could be termed as waste and scrap within the statutory definition given under Chapter 72 and eligibl....
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....nd not under Rule 57F(4) as contended by the party. The definition of waste and scrap as mentioned in Section XV of the Central Excise Tariff Act, 1985 made effective from 1-3-1988 and even earlier has the same meaning. The word `definitely not usable as such' in the definition of waste and scrap has significant meaning. It has to be interpreted to mean if not usable as such (not in the factory itself even outside) the ultimate use is melting for recovery of metal and that case it is not used as such. In this case, from the very description and nature of the material as borne out by the panchanama and samples drawn is not for the purpose of melting but was having capability of further use in most of the cases. It, therefore, has to be construed that the party never disposed off the said material in the manner as required to deal with melting scrap. The identity of the material so disposed of is proved .... that it was not the scrap as defined under Central Excise Tariff Act, 1985 and even within the provisions of Rule 57F of the Central Excise Rules, 1944. As held above that so-called waste and scrap of steel sheet cleared was not in the form of waste and scrap as defined und....
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....ngs, correspondence, visits of officers and audit classification list filed and approved by the department and various other materials were referred to show that the department had full knowledge of the nature of scrap arising during the course of manufacture of the final product and the manner in which it was removed from the factory. On the basis of these materials, ld. Counsel submitted that the demands are barred by time. Ld. Counsel pointed out to the show cause notice dt. 5-3-1983 which pertained to similar issue of generation of scrap in the process of manufacture which pertained to the period 5-7-1978 to 5-7-1983. The Asstt. Collector had confirmed the show cause notice by his order dt. 31-12-1984 taking note of the manner in which the waste arises in the appellant's activity of manufacturing of final product. The appellant had preferred an appeal before the Collector of Appeals, who by his letter dt. 5-11-1985 inter-alia had held that payment of duty should be restricted only for a period of six months, prior to the issue of show cause notice and that there was no warrant to invoke the extended period of limit, as the Deptt. was aware of the complete facts and the manne....
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....e - 1990 (47) E.L.T. 665. 4. Bimetal Bearings Ltd. v. Collector of Central Excise - 1990 (45) E.L.T. 285. 5. Andhra Pradesh State Electricity Board v. Collector of Central Excise - 1988 (35) E.L.T. 199. Ld. Counsel referring to the show cause notice and submitted that the Deptt. had proceeded as if they had initiated the proceedings on the basis of the intelligence report. He pointed out to the material on record to show that there was no question of any intelligence report in this case as the transactions were recorded and had been within the knowledge of the Department. He pointed out to the letter dtd. 29-1-1993 addressed by the Advocates to the Collector wherein they have sought clarification as to when the alleged intelligence was received by the Department and whether the intelligence was oral or written. The Deptt. by their letter dt. 12th February, 1993 had stated that nature and contents of the intelligence collected while booking the case cannot be disclosed, as it being secret. Pointing out to these materials, the Counsel submitted that there was nothing secret about the whole issue as the appellant themselves had noticed the advertisement as of sale o....
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....at of Shri S.K. Tiwari, Shri M.R. Joshi, Shri P.S. Vaidya, Shri Madhur Bajaj, Shri M.C. Joshi, Shri M.V. Iyer, partner of Rameshan Engineering Co., Shri Prakash Khopade, Shri M.S. Bhosale, Officer of M/s. A.M. Enterprises, Shri Suresh Bapat, proprietor of Manas Industries and the scrap dealer Shri Abdul G. Chowdhury, partner of Good Luck Trading Co. He also referred to several witnesses who have not been classed opted for cross examination by the Department". 8. On the question of merits, ld. Counsel relied on the definition of the waste and scrap itself appearing in the Section Note XV of the Central Excise Tariff, 1985. He pointed out to the definition appearing in Central Excise Tariff, 1986 as on 1-3-1986 in Chapter 72 which describes Waste and Scrap : "Waste and Scrap of iron or steel fit only for the recovery of metal or for use in the manufacture of chemicals, but does not include slag, ash and other residues." He pointed out that to this definition and submitted that this definition was modified by the Central Excise Tariff, 1988 as on 1-3-1988, which read : "Metal Waste and Scrap from the manufacture or mechanical working of metals, and metal goods d....
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....f manufacture of final product and also those scrap which arose for mechanical working of the metals. He submitted that although waste scraps are goods and there cannot be any doubt about it but the meaning to these scraps, cannot be given a wider scope. Ld. Counsel submitted that every scrap will be utilised for recovery of metal and therefore, the first two portions of the definition should not be made redundant by stating that they are not meant for utilising metal. All the three types of scrap arising from the definition were definitely useful for recovery of metals. The affidavit of Dr. Choudhary disclosed that when steel sheets undergo drawing operations in press shop, their tensile strength, elongation and hardness are always affected as indicated by tests carried out on the fresh material and those generated as a scrap. He submitted that the scrap was hard and it made the material brittle. Hardness are not improved by this quality and therefore, such material was not as per the ISI specification or understanding of M.S. Steel Sheets. The scrap arising from press cuttings were also not recognised and accepted for manufacture of quality goods. These scrap materials were utili....
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....ed were in the shape of M.S. Strips and Circles and their sizes had also been noted. The scrap generated in appellants' own factory had been utilised in the manufacture of their own goods. Therefore, the entire materials removed as scrap, were to be treated as such and therefore, the finding given by the lower authorities should be accepted. He submitted that the technical details of the literature were not relevant. On time bar, ld. JDR submitted that the appellants had not fully described the goods and also had not given the details and therefore, mere visits to their factory by departmental officials cannot be a ground to hold that the department was aware of the proceedings. There was a clear mis-declaration and hence larger period was invokable. He relied on the rulings rendered by the Supreme Court in the case of : (1) Jayshri Engineering Co. (P) Ltd. v. Collector of Central Excise - 1989 (40) E.L.T. 214 (2) Shri Hanuman Metal Industries v. Collector of Central Excise, Delhi - 1984 (18) E.L.T. 652 10. We have carefully considered the submissions and have perused the records, impugned orders, citations and the literature produced before us. We ....
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....ng steel sheets into blanks for various parts. 2.Scrap arising out of trimming, punching of steel sheet blanks while manufacturing. 3.End pieces of steel bars and tubes after cutting blanks. 4.Turnings arising out of machining of forgings, bar and tube parts. 5.Rejected components. They have also given in this letter the details of scrap sold from 1978-79 to 1982-83. The Asstt. Collector has passed a order on 31-12-1984. By this order, the Asstt. Collector has gone through the entire aspect of the generation of scrap and has confirmed the duty for the period 5-7-1978 to 31-7-1983 in terms of show cause notice dated 5-7-1983 and 4-1-1984. The appellants had filed a writ petition before Bombay High Court. The same was disposed of directing them to seek appellate remedy. Therefore, they filed a appeal before Bombay Collector (Appeals) who by his order dated 5-11-1985 restricted the demand to only 6 months on the ground that there had been no suppression of facts. We have also gone through the correspondence between the appellants and the department on this subject. There is a letter dated 13-6-1986 from the Supdt. with regard to payment of duty on steel/iron scrap (7203....
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....espect of other industries also. In all these Challans and gate passes, the appellants have clearly described the goods as steel strips. On a perusal of these materials, it is clear that there has been no mis-declaration or mis-description, while removing the goods to the traders and small scale industries who have manufactured the items for the appellants. Therefore, the allegation that there is mis-declaration, mis-statement and suppression is not proved by the department. The department has proceeded on the ground that the inputs which are removed under Rule 57F(i)(ii) or part of the input for home consumption declaring it as waste and scrap arising from the process of said goods. It is the departments' case that these inputs cannot be considered as waste and scrap, as they had been utilised for manufacture of finished goods in the premises of vendors/job workers and other manufacturers to manufacture the articles, locks, cycle parts, motor vehicle parts, domestic kitchen articles, electric parts, cycle parts by treating inputs as waste and scrap. The assessee has explained that they were holding a bona fide belief that this type of sale constitute only 2% of the entire sale of ....
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....ppellants had declared the said goods as their inputs under Rule 57G(1) of Central Excise Rules, 1944 to be used in the manufacture of their product (Motor Vehicle and Components thereof) for the purpose of Rule 57A in order to avail the credit of duty paid on the said inputs. However, they had removed part of the said inputs for home consumption declaring it as "Waste" arising from the precessing of inputs after discharging the duty on the said inputs in the manner as provided under sub-rule (4) of Rule [57F], although the appellants were liable to pay the duty on such inputs in the manner as provided under Rule 57F(i)(ii). It is the department's case that the M.S. Sheets of irregular dimensions, circles, patties/strips all retain the essential characteristic of sheets, and that they are not "waste and scrap" and hence full duty as on inputs is required to be paid and not the duty as on the waste and scrap and hence the differential duty has been demanded in these proceedings. We have held that the recoveries are barred by time for reason noted supra. However, the question still remains to be answered as to whether, these inputs i.e. M.S. cuttings, trimmings and circles retains al....
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....asers are scrap dealers and mere 2% is purchased by some small units and they also buy it as scrap, for manufacturing small components, which are not as per ISI specifications. However, in trade and commercial parlance, the scrap sold is not recognised as M.S. Sheet cuttings and technically also it is not so recognised. These contentions are supported by oral and documentary evidence, which we will examine hereinbelow : (i) Shri P.V. Santurkar, Chief Executive of the appellant's factory in his cross examination has denied having cleared good steel sheets. The samples were shown to him, which was a piece 470 x 985 mm. He denied this piece to be called as Scrap, as this type of pieces, were used in the factory for manufacturing smaller components. He admitted generation of scrap in press shop. In press shop, pieces were cut to the required size, by forming, deep drawing, piercing trimming etc. He stated that the scrap which is so generated in press shop does not retain the same properties of the steel sheets; as these cut pieces get generated after various operations, therefore, the size, shape and physical properties like tensil strength, thickness etc. changes while sheets ....
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....ment had recorded the statement of Sh. Kishor Vasudev Kothurkar, Manager, Production and Planning in appellants' factory. He was also shown the said GP 1 Nos. 423 & 424; GD Notes 8768, 8770 dt. 8-6-1988 and variety of goods shown as M.S. Scrap. He has stated that such sheets cannot be declared as scrap unless they are deformed or rusty or pitted. He has also stated that such sheets should not have gone outside the factory. In his cross examination, he has stated that the samples shown to him by the department were scrap. They procure M.S. Sheets of size of 1000 mm x 2000 mm, 125 mm x 2500 mm, 1500 mm x 3000 mm. The scrap is generated in press shop and in three wheeler body shop and that is stored in scrap yard, which is 30,000 square feet, and in open plot of land with roads on all the three sides. He submitted about the procedure laid down by the General Manager for determining the scrap and the procedures laid down by them. He also stated that the portion sent to scrap yard were not steel sheets. (iv)Sh. Shankar Bayaji Madane, Manager Press Shop was also examined by department on 21-10-1988. In this statement he has given the details of different parts manufactured an....
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....t I got in return was only bricks and stones. When I think of the officers of that organisation I feel like abusing them, therefore, I resigned. (vi) Sh. Sharad Madhav Modak, Manager's (Materials) statement was also recorded on 6-8-1988. He has explained the method of selling the scrap (Ferrous and non-Ferrous). They advertised in the paper to sell the scrap and their categories and sealed tenders were invited from interested parties. When he was shown samples seized from the premises of M/s. Precimax Engineers, he replied that it cannot be used for manufacturing of any components. In his further statement dt. 2-11-1988 he confirmed that this piece could be used for manufacture of components and this was also a raw material for their factory also. He spoke about a loaded tempo with rectangular steel sheets measuring approximately 1 feet 11/2 feet, which had been intercepted at the main gate, and the material was brought back and sent to press shop for further use. Later, after this incident they had adopted procedure for strict checks in consultation with general manager. He was also cross examined. (vii)Sh. J.J. Mehta, Material Manager had also been examined and stateme....
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....corded on 8-9-1988. He admitted purchasing from Bajaj Auto the following type of materials : (i)M.S. Scrap (ii)M.S. Patties (iii)Steel Sheet Cover, Side Cover, Packing Strips (iv)Wheel Reem Circles. He denied having purchased M.S. Turning and borning [sic] scrap from them. The scrap generated in Bajaj was being sorted out in the above category and as per tenders paid the different scrap rates. He stated that ever sheet cuttings are sold by them, that could be used for manufacture of smaller machinery parts, foreg, locks, parts of cycles, electrical parts, Radio, Machine parts etc. and these sheet cuttings or wheel Reem Circles were not used for melting purposes, as it is not economically possible. He submitted that in his letter dt. 20-7-1988, admitted that during the period 1-7-1986 to 30-6-1988 had purchased 20,800 mts of M.S. Scrap from M/s. Bajaj Auto. They had lifted types of scrap, such as strips, patties circles etc. from July, 1986 to June, 1988 at the press ranging from Rs. 4617/- to Rs. 9687/- PMT, after the acceptance of tenders. In his cross examination he had stated that he had purchased scrap from M/s. Hindustan Motors, Calcutta, M/s. Telco, Pune and fr....
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.... tubes and forging of steel. He stated that M.S. Scrap means the sheet metal scrap generated, which is material reduced from certain press shop operations. Such scrap is of various irregular shapes and sizes. It also includes process rejection of sheet metal items. M.S. Patties, the scrap generated by press shop operations on sheets. Such scrap is having minimum width of 2" and minimum length of 2 feet. Assorted steel scrap (Excisable) consists of scrapped end pieces of bars and tubes, scrapped nuts and bolts etc. He also explained that Assorted Steel Scrap (Non-Excisable) consist of end pieces of civil construction material such as Tor Steel, Angles, Channels etc. on which MODVAT credit was not available. He explained that rejected CRCA Press components were not included in Assorted Steel Scrap. Steel Scrap was generated in press shop. M.S. Sheet Metal scrap generated in the press shop was dumped continuously into the scrap yard adjacent to press shop. From where the scrap dealers/vendors lifted the clearance were made on payment of duty. Scrap of M.S. Patties, and scrap of Wheel Reem Circles were sorted out and dumped in separate location in scrap yard. Scrap lifting was su....
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..... MET/5/7654 Metallurgical Testing and Consultancy Services, College of Engineering, Pune-411 005. Date : 14-3-1992 M/s. Bajaj Auto Ltd. Akurai, Pune-411 035 Ref : - Your letter No. Nil of 13/3/92. Sub : - Testing of Sheet Specimens. Attn : - Mr. Katyal SAMPLE Identify Marks : TEST REPORT Physical Testing Sr. No. Tensile strength Kg/mm^2 Percent Elongation (G.L.=10 mm) Hardness H V 10 1. S-1 sheet for body half tool box side 29.3 43 94 2 .S-2 sheet for body half tool box side 29.4 40 91 3. T-1 Trimming of body half tool box side 39.2 10 121 4. T-2 Trimming of body half tool box side 39.1 12 132 Remarks : -The samples serial No. 1 and 2 conform to DIN 1623, RR st 14 grade. The samples serial No. 3 and 4 do not conform to DIN 1623, RR st 14 grade, which indicates that properties of original sheets have changed during processing." 19. The appellants have also produced the copy results of laboratory report in respect of fresh sheets and those of scrap. The same is reproduced herein below : "Date 12-10-1992 LAB No. M588 LABORATORY REPORT Item Descriptio....
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....bsp; (A) Indicates Analysis on Atomic Absorption DY. GENERAL MANAGER" 20. The appellants have produced the extracts of the following authorities to plead that the material change and do not retain their characteristics on certain conditions. The extracts are from the following :- (i) "Source Book on Forming of Steel Sheet" A discriminative selection of outstanding articles from periodicals and reference literature complied by consulting Editor, Johan R. Newby Senior Staff Metallurgist Research and Technology Division Armco Steel Corporation. American Society for Metals. (ii) "The Making Shaping and Treating of Steel" Edited by William T. Lankford, Jr. & three other published by United States Steel Chapter 8. (iii) 1985 SAE The Engineering Resource for Advancing Mobility. Product of the operative Engineering programme. Vol. I Materials. (iv) `Press Work & Presses', A treatise on the problems of light press work, press-tool design, and press operation by J.A. Grainger second Edition Published by `The Machinery Publishing Co. Ltd., London & Brighton. (v)AIDA Press Hand Book by V.S. Cha....
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....echanical Properties Hot-rolled and cold-rolled sheets, when specified as commercial quality, drawing quality or drawing quality special killed, are generally produced to make identified parts without guarantees on mechanical properties as rejection limits. However, after years of experience, producers and consumers have established guidelines of inspection, testing and acceptance which are usually negotiated and mutually agreed upon, based upon knowledge of end part application. Some interesting observations are these :- 1. Thickness tolerances have been reduced in recent years as a benefit derived from improved automatic equipment. Also, a higher percentage of the material will generally be closer to the desired thickness than heretofore. Thickness tolerance can be applied equally or unequally, over and under but a recent trend has been to specify a minimum thickness with zero tolerance on the minus side. 2. Flatness is a standard rather than a process. Generally, there are two standards of flatness (commercial and stretcher levelled) which can be obtained by the use of various flattening methods such as roller levelling, tension levelling, special roller ba....
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....4 36/44 Cold-Rolled (0.0239" to 0.1345") CQ 40/60 28/36 40/48 36/41 DQ 38/48 25/32 40/46 38/43 DQSK 36/45 23/28 40/46 40/45 Commercial Quality  :   CQ Drawing Quality  :   DQ Drawing Quality Special Killed:DQSK Other test values are sometimes determined to better assess the formability of steel sheets such as uniform elongation (prior to local neck down), plastic strain ratio "r", work hardening exponent, along with test values obtained by various cup-drawing tools and procedures, such as the Olsen, Erichsen, Swift and Fukui tests. DIMENSIONAL CHARACTERISTICS The tolerances for thickness, width, length, flatness, etc. are listed in various publications, such as ASTM A-568, AISI Carbon Sheet Manual (available in small pocket size) and in commercial brochures. In some cases, restricted tolerances are available, subject to negotiation. 3. Reduction of delay between draws. Insofar as possible, progressive forming and drawing, should be completed in prompt, successive stages. The frictional heat of the draw coupled with the delay between draws accelerates the ag....
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....nd the means to be adopted in avoiding them, is to ask for trouble-and get it. Very careful consideration should be given to every individual job, and all the snags liable to be encountered during manufacture disposed of, as far as possible before starting to tool-up. Tentatively, the number of operations and the sequence in which they are to be performed should be laid down, taking into account such things as the size and shape of the finished product, and the finished required or to be applied. Any draw tool, whether for first, second or subsequent metal is stressed past its yield point to cause plastic flow, any considerable variation in the material will have a serious effect on its performance. Variation may exist in the consistency of grain structure, temper ductility, strength, analysis and guage size." 24. Indian Standard Specification for Cold Rolled Low Carbon Steel Sheets and Strips IS: 513: 1986 (Third Revision) has been approved by the Structural and Metals Division Council: para 0.2.1 states that: "0.2.1  In this revision, the chemical composition requirements for the various grades have been modified in line with the requirements of the co....
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....racteristics 3.4.1. The manufacturer shall guarantee the absence of stretcher strains on being colf worked in the case of non-ageing quality D and DD grade material for a period of 6 months from the date of despatch. 3.4.2. EDD grade sheets and strips shall be supplied in non-ageing quantity with a non-ageing guarantee for 6 months from the date of despatch. Para 6 lays down Mechanical and Physical Properties. Para 7 lays down the specification for surface finish. Para 8 Freedom From Defects 8.1 The finished sheets and strips shall be free from harmful defects, such as scales, rust, blisters, aminations, pitting, porosity, cracked or torpedges or any other defects which will impair spot welding and unified appearance of painted, electroplated and enamelled surface. 8.2 The degree or amount of surface defects in a coil may be expected to be more than in cut lengths because of the impossibility of rejecting portions of a coil. This shall be taken into account by the purchaser in his assessment of the material. An excessive amount of defects may be cause for rejection. 8.3 The sheets shall be reasonably flat and edges cleanly sheared and squared ....
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.... but unfortunately no efforts have been done either to analyse the statements or to consider the entire contentions of the appellants in the light of the controversy and evidence placed by them. It is a settled law that one who alleges should prove his case, and in absence of any proof or materials placed in support of the allegation, then, it is to be presumed that the allegations are bald and that there is no substance in the case and that case is required to be rejected. It is also well settled that when material facts are not controverted and placed by either side, then also it should be presumed that there is no substance in the allegation or the defence taken and, therefore, the case is required to be rejected or accepted, as the case may be. In this case, the department has not sent the samples for any chemical analysis for test, nor have they produced any expert opinion or evidence on trade or commercial understanding of the term `waste and scrap' vis-a-vis M.S. Sheet. Besides, the department has not also controverted the evidence produced by the appellants. Therefore, on this ground alone, the contentions of the appellants required to be accepted and impugned order are req....
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....al books also refer to the strict manner in which the M.S. Sheets are to be manufactured and it should be to the specifications for use, for manufacture of the parts and accessories. The extract from the `Source Book of Forming of Steel Sheet' points out to the technical details of cold, reduction, annealing and Temper Rolling, to the mechanical properties, Ageing, process, dimentional characteristics. The reading of other technical literature also emphasise the need to have the Steel Sheets to the standards and speaks about the problems, hazards and difficulties posed in using worthless materials or those technical flaws and repurcussions about it. It has also been pointed out that the drawing cutting of the steel sheets leaves on the cutting waste portions stresses, strains and also speaks of the structural and composition changes, which occurs, making the cut sheets as scrap and waste and also it loses its qualities. The extracts and figures from `Campbell Memorial Lecture' gives details on such matters. The extract from `The Making, Shaping and Treating of Steel' Chapter 8 deals about `scrap for steel making'. The details from `Press Work and Presses' is a treatise on the probl....
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....es to be called as M.S. Sheet strips, circles or cuttings. Merely because they have same dimensions and sizes that by itself is not enough to grant such `waste and scrap', the status of M.S. Strips, circle or a cutting. It requires to conform to high standards both technically, as and understood in trade circles. If scrap is considered as a good material, and which does not have any technical qualifications, then it would lead only to fraud, as such sale of junk would get passed off as good and standard materials. It would bring in ruination to the Engineering Standards. Mere use by some small manufacturer to manufacture some technically substandard goods, by itself is not the criteria to call a scrap as a technically sound M.S. Strips, circles or cutting. The criteria for giving the nomenclature of M.S. Sheets, strips, cuttings, circles etc. is not the utilisation of thrown away scrap and worthless materials by same SSI manufacturers, but it is the understanding given by technical and scientific understanding, the standards and specifications laid down by persons dealing with it by scientific institutions like ISI, British Specifications. The most important reason for establishing....
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....s necessary for the manufacture of the final products and return to the factory, for further use in the manufacture of the final products, provided that the waste, if any, arising in the course of such operation is also returned to the said factory. The Rule 57F(2)(b) refers to the return of the waste, if any, arising in the course of manufacture, of such intermediate products, is also returned to the said factory, it need be returned, if the appropriate duty of excise leviable thereon has been paid. In this case, the party had removed `waste and scrap' as input to the job worker and they had paid duty on the waste arising in the course of manufacture of final products, when the same has not been brought back. 33. Rule 57F(3) speaks of utilisation of credit of specified duty allowed in respect of any inputs, towards payment of duty of excise -- (ii) on the waste, if any, arising in the course of manufacture of the final products. Rule 57F(4) also states that : Any waste, arising from the processing of inputs, in respect of which credit has been taken may - (a) be removed on payment of duty as if such waste is manufactured in the factory; or (b) be removed w....
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.... 1990 (15) E.T.R. 757 at para (6) at page No. 759-760. The same is reproduced herein below : "6. It is observed that the provision in sub-rule (2) to Rule 56-A by Explanation make available the credit in respect of the inputs which may be contained in the waste, refuse or by-product came into the force sometime in 1981 and this provision has been specifically made to take care that the assessees may not be required to vary the credit because some waste, etc. arise `during the process of manufacture' has to be understood with reference to the various processes, which take place culminating in the production at the end, of the product in respect of which benefit under Rule 56-A was allowed. Any defective product, which is accepted by the authorities as not marketable end-product, has to be considered as waste. A defective tyre and tube emerges because of some defect left in the product during the process of manufacture and hence it has to be considered that the cut tyres and tubes which are cleared, are the result of the activity during the manufacturing process. The departmental authorities themselves in the context of MODVAT credit under Rule 57-D(1), as evidenced by the Tr....
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.... held that dross and skimmings are merely the refuse, scum or rubbish thrown out in the process of manufacture of aluminium sheets and cannot be said to be arising as a result of treatment, labour or manipulation, thereby a new different article emerges with a distinctive name and character or use, which can ordinarily come in the market to be bought and sold. The Court has further held that merely because such refuse or scum may fetch some price in the market, it does not justify to be called as a by-product, much less as an end-product or a finished product. Therefore, the Court has held that they are neither `goods' nor `end-products' nor `finished products' liable to duty under Item 27 of Central Excise Tariff. This ruling is also very relevant for the purpose of this case. As the refuse i.e. waste and scrap thrown out during the process of manufacture cannot by any stretch of imagination be considered as final original product i.e. M.S. Sheets, merely because the waste and scrap is being used by some small scale industrialists for manufacture of some items. 36. In the case of M/s. L.M.L. case, (supra) the Tribunal, on examination of the materials had found that the mat....
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....e and scrap, has sold such sheet metal parts to the appellant company's two units, (ii) even where the so-called scrap has been sold to scrap-dealers, those dealers, in turn have further sold such so-called scrap to various manufacturers for utilisation by the latter in manufacture to various steel articles of sheet metal of non-ISI grade; in the same way a steel sheet would have been put to use for manufacture of other articles. 40. From the evidence brought on record, it is apparent that the department was fully aware of the generation of the so-called `waste & scrap' and its clearance by the appellants right from 1983 onwards in the case of Pune Unit and March 1986 in the case of Aurangabad Unit. Correspondence exchanged in the course of earlier adjudications, though no doubt on the dutiability of scrap rather than on the nature of scrap, clearly shows that the department was aware of the nature of so-called `scrap' and yet never raised the issue, which it could, that such `scrap' was not really `scrap' but sheets. No allegation of wilful mis-statement or suppression of facts or contravention of any rule with intent to evade payment of duty can be sustained against the a....
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....scrap' and pieces of rectangular shaped conforming to definition of sheets on payment of duty applicable to sheets. 9.2. We have suggested the foregoing various alternatives with a view to finding a solution to the problem keeping in view the operational necessity of an assessee and the need to prevent the possibility of an abuse. It is, however, essentially for the authorities to find an appropriate solution. We have no intention to impose procedure through a judgment in this appeal." 42. Learned Advocate, however, points out that the judgment of the Tribunal in LML's case would not be of much relevance in view of the changed definition of the expression `waste and scrap' from "fit only for recovery of metal or for use in the manufacture of chemicals........." is no longer current. Present definition as given in Section Note 6 to Section XV is : "Metal waste and scrap from the manufacture or mechanical working of metals, and metal goods definitely not usable as such because of breakage, cutting up, wear or other reasons." Learned Advocate has stated that the `waste and scrap' under consideration in this case is undoubtedly a result of the mechanical working o....
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...."iron & non-alloy steel ingots or other Primary forms ....." It is significant to note that `Ferrous waste & scrap' falls under Heading 72.04 is sub-section I of Chapter 72 pertaining to Primary materials etc. and is clubbed with remelting scrap ingots of iron & steel. Subsequent Headings 72.07, 72.08 describe the `goods' as products. There is, therefore, substantial force in the learned JDR's submission that if the so called `waste and scrap' is usable as sheet, it cannot be termed as `waste and scrap'. If it is cleared, debit must be made at the rate of duty payable on sheet subject to any other provision of law. 45. But as stated in the judgment of LML, supra, there is a very thin line between `waste and scrap' and 'sheet' (described as off-cut in that case). Each consignment will have to be examined to determine the usability of the `goods' sought to be cleared. 46. Since the goods have already been cleared, for determining duty liability in terms of past six months from the show cause notices, documentary evidence will have to be taken into account to arrive at the findings of `usability'. For this purpose, the matter is remanded to the adjudicating authority. ....
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....d metal goods in Chapter 73 and in this context, the ld. Sr. Counsel pleaded that the sheets are only metal and not metal goods. He has, further, contended that even taking them as metal goods, they will still be waste and scrap after being put to use as sheets and having undergone cutting up and thereby became scrap and it is not usable as such thereafter. The evidence of scrap dealers was also referred to for saying that the goods are not metal sheets. The appellants themselves regarded the goods as scrap which is evident in their own advertisement for the disposal of the sheets. 49. The ld. S.D.R., Sh. B.K. Singh supported the order of the Hon'ble Member (Technical) and argued that the definition of the term `waste and scrap' in the tariff as given in Section XV, Section Note 6 is paramount and relied upon the case law reported in 1990 (45) E.L.T. 490 in the case of Collector of Central Excise v. ESKAYEF Limited to say that statutory definition is to be preferred in place of commercial understanding. He also in this context relied upon the Supreme Court decision in the case of Collector of Central Excise v. Krishna Carbon Paper - 1988 (37) E.L.T. 480. The question to be ....
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....finitions as available in the Harmonised System. Since the commodity descriptions would now be based on the H.S., the general guidelines available in the Explanatory Notes to the Harmonised System could be referred to in case of any doubts." Therefore, it will be appropriate and in order to refer to the scope of the term `waste and scrap' as defined in Section XV Note (6) in HSN and of the Explanatory Note under Heading 72.04. The definition of the term `waste and scrap' under Sl. No. 6(a) in Section XV HSN is identical with that in the CETA after alignment. The scope of waste and scrap is explained in HSN, inter alia, as follows : "Waste and scrap is generally used for the recovery of metal by remelting or for the manufacture of chemicals. But the heading excludes articles which with or without repair or renovation, can be re-used for their former purposes or can be adopted for other uses; it also excludes articles which can be re-fashioned into other goods without first being recovered as metal......." Viewed in the light of the definition of the term `waste and scrap' in CETA and its scope as found above, it will be difficult to sustain the appellants' arguments that th....
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....e HSN Explanatory Notes. In Section XV of HSN under the heading "General" at p. 972 it has been stated that each of Chapters 72 to 76 and 78 to 81 covers particular unwrought base metals and products of those metals such as bars, rods, wires or sheets as well as articles thereof. 51. In view of the above reasoning, one is inclined, in the facts and circumstances of this case, to agree with the order proposed by the Hon'ble Member (Technical) that if the so-called waste and scrap is usable as sheet, it cannot be termed as `waste and scrap' and that if it is cleared, debit must be made at the rate of duty payable on sheet subject to any other provision of law and that further since the goods have been cleared, for determining duty liability for the past six months from the Show Cause Notices, documentary evidence will have to be taken into account to arrive at the finding of "usability" for which purpose the case has to be remanded to the adjudicating authority. The order proposed by Hon'ble Member (Technical) is, therefore, concurred with. Sd/- (K.S. Venkataramani) Member (T). MAJORITY ORDER 52. [Order per : S.L. Peeran, Member (J)....