TaxTMI 
TaxTMI 
2004 (2) TMI 68
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....sides showing them as non-excisable in their Despatch Advices. According to the Department, the assessees have cleared the goods without payment of duty and thus evaded duty in contravention of the Central Excise Rules, 1944 and in doing so they did not obtain Central Excise licence for manufacture of zinc dross and flux skimming as required under Rule 174 of the Central Excise Rules, 1944 inasmuch as they have suppressed the production and removal of the said goods with intent to evade payment of duty. Case for the Department : 3.A show cause notice was issued to the assessee to show cause why a penalty should not be imposed on them under the provisions of the Central Excise Rules, 1944 and why the duty be not demanded under Rule 9(2) of the Central Excise Rules, 1944. Case for the party : 4.In response to the show cause notice, the assessee made a written defence denying all the allegations of contravention of various Central Excise Rules and stated that flux skimming is a material held as non-excisable by the CEGAT. In support of their contention, they have cited various judgments and, in particular, the case of Indian Aluminium Co. Ltd. v. A.K. Bandyopadhyay [1980 (....
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....d the payment of penalty which was imposed. The Commissioner (Appeals) rejected the appeal filed by the assessee. The Tribunal, on appeal by the assessee, set aside the order in appeal holding that zinc dross and flux skimming are not excisable goods following the decision of this Court in Indian Aluminium Co. Ltd. (supra). The Tribunal further relied on the decision in the case of Tata Iron and Steel Company Limited v. CCE, Patna [2001 (135) E.L.T. 1142] and Siddarth Tubes Limited v. CCE, Indore dated 8-4-2002 which referred to the judgment in the case of Indian Aluminium Co. Ltd. (supra). Before the Tribunal, it was submitted by the Department that zinc dross is a distinct commercial commodity and hence liable to excise duty. 8.Civil Appeal No. 5664 of 2002 also arises out of similar circumstances. In this appeal, according to the assessee, zinc dross and zinc scalling does not constitute to be excisable goods as defined in Section 2(d) of the Central Excises and Salt Act, 1944 and, therefore, they filed refund claims for amount of duty paid on zinc scalling. 9.According to the Department, prior to 1-3-1988 as per Chapter Note 3 of Chapter 26 ash and residue other than dros....
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.... Act, 1985. He, therefore, prays that the appeals filed by the appellant be allowed. He would further submit that prior to 1-3-1988, as per Chapter Note 3 of Chapter 26 ash and residue other than dross and ash of zinc containing metals or metallic compounds applies only to the ash and residue of a kind used in industry either for the extraction of metals or as a basis for the manufacture of chemical compound of metal. This chapter note was subsequently amended w.e.f. 1-3-1988 by omitting the words "other than dross and ash of zinc containing metals of metallic compounds". Thus he submits that prior to 1-3-1988, the said dross and ash of zinc containing metals or metallic compound were classifiable under 7902 and subsequent to 1-3-1988 the said product got classified under sub-heading 26.20. It was contended that a close reading of the above chapter note reveals that the heading 26.20 covers ash and residue which contain metal or metallic compounds and which are of kind used in industry either for the extraction of metal or metallic compound or as basis for the manufacture of chemical compound of metals. 13.Countering the argument Mr. J. Vellapally, learned Senior Counsel for the....
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....als in something; refuse and rubbish or worthless impure metal and skimming is that which is removed or obtained from the surface by skimming. These are, in our opinion, nothing but ashes resulting in the process of manufacture of aluminium sheets from aluminium ingots. In Union of India v. Delhi Cloth and General Mills Co. Ltd [1977 (1) E.L.T. (J199) (S.C.) = (AIR 1963 SC 791)] it was held that "goods" must be something which can ordinarily come to the market and be brought and sold and that the "manufacture" which is liable to excise duty under the Central Excises and Salt Act, 1944 must, therefore, be the "bringing into existence of a new substance known to the market". The passage runs thus :- "Manufacture" implies a change but every change is not manufacture and yet every change of an article is the result of treatment, labour and manipulation. But something more is necessary and there must be transformation; a new and different article must emerge having a distinctive name, character of use." 16.We are of the opinion that the dross and skimming are merely the refuse, scum or rubbish throughout in the process of manufacture of aluminium sheets and, therefore, cannot b....
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....uantity of raw material, namely duty-paid aluminium ingots procured by the assessees from outside was used in the manufacture of aluminium sheets. It is nobody's case that the aluminium sheets which were manufactured by the assessees could have been manufactured out of a lesser quantity of aluminium ingots than what was actually used. In the process of manufacture, dross and skimmings had to be removed in order that aluminium sheets of the requisite quality could be manufactured. This does not mean that the entire quantity of aluminium ingots was not used for the manufacture of aluminium sheets. In the course of manufacture, a certain quantity of raw material may be lost because of the very nature of the process of manufacture or some small quantity of raw material may form part of wastage or ashes. This does not mean that the entire raw material was not used in the manufacture of finished excisable products. An exact mathematical equation between the quantity of raw material purchased and the raw material found in the finished product is not possible, and should not be looked for." Under Tariff Item 27 "Waste and Scrap of Aluminium" is one of the items exigible to excise duty. ....
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...."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 Customs, Excise and Gold (Control) Appellate Tribunal in its order, which is the subject-matter of Civil Appeal No. 1423/87, has given several examples of this kind of exclusion which is covered by the Explanation to Tariff Item 68. It has given the illustration of a motor specially designed for use in a gramophone or record player which is expressly excluded from Tariff Item 30 which ....
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....entral Excise, Indore v. Universal Cable Ltd. reported in [1995 Supp. (2) SCC 465], has not been noted or considered. In this case an argument that a goods become excisable because it is covered by Tariff Entry, has been negatived. In the case of B.P.L. Pharmaceuticals Ltd. v. Collector of Central Excise reported in [1995 Supp. (3) SCC 1] it has also been held that merely because there is a change in the Tariff Item the goods does not become excisable. Subsequently in a judgment dated 13th February, 2003 in Civil Appeal No. 6745 of 1999 it has been held that merely because an item falls in a Tariff Entry, it does not become excisable unless there is manufacture and the goods is marketable. In Lal Woollen & Silk Mills' case (supra) it has not been held that the twin test of manufacture and marketability is not to apply. It is not possible to accept the contention that merely because an item falls in a Tariff Entry it must be deemed that there is manufacture. The law still remains that the burden to prove that there is manufacture and that what is manufactured is on the Revenue. In this case, no new evidence is placed to show that there is manufacture. "Spent earth" was "earth" on wh....
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....ise duty sought to be levied on 'spent earth'. This was in Commissioner of Central Excise, Chandigarh v. Markfed Vanaspati & Allied Industries [2003 (153) E.L.T. 491]. Excise duty was being paid on "earth'', 'spent earth' is a residue resulting from treatment of fatty substances. The 'spent earth' remained 'earth' even after processing though its capacity to absorb was reduced. It was held that no excise duty was leviable on 'spent earth'. The facts in this case are quite similar to the facts of the case in hand. In Markfed case 'earth' was reduced to 'spent earth' with a reduced potency to absorb. In the case in hand, coal was reduced to inferior quality coal which was no longer of use in the furnaces in the factories, therefore, it could be reasonably be said that 'cinder' i.e. coal of reduced quality still was coal and not exigible to excise duty. In Modi Rubber Ltd., Modi Nagar, U.P. & Anr. v. Union of India & Ors. [1987 (29) E.L.T. 502 (Del.)] it was held that waste/scrap obtained not by any process of manufacture but in the course of manufacturing the end product was not exigible to excise duty. This was a case of manufacture of tyres, tubes etc. In the course of manufactu....