TMI Blog1995 (11) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... goods falling under Chapter 26 of the Schedule may be cleared at nil rate of duty provided that no credit of duty paid on the inputs used in the manufacture of the said goods has been taken under Rule 56A or 57A. Since the department was of the view that the appellants did not fulfil this condition as they had availed the benefit of Modvat credit on inputs used in the manufacture of aluminium dross, pot dug out material and furnace dug out material and cleared them without payment of duty, show cause notices were issued proposing recovery of duty and imposition of penalty. 2. The appellants replied to the notices setting out the process of emergence of aluminium dross, pot dug out material and furnace dug out material. They contended inter alia that these items were not excisable goods and that the inputs on which Modvat credit was taken by them are ... used in the manufacture of aluminium and products thereof and no input is used in the manufacture of aluminium dross, pot dug out material and furnace dug out material and hence they are not hit by the proviso to Notification No. 19/88. They also cited the judgment of the Hon ble Bombay High Court in the case of Indian Aluminium C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 26-10-1993 7,20,442.70 5,000/- 8. E/2059/94-C May 1993 to June 1993 20-7-1993 4,62,637.38 5,000/- 4. Shri V. Sridharan, learned Counsel appearing on behalf of the appellants, submits that the appellants are engaged in the manufacture of aluminium products such as aluminium ingots, billets, wire rods, etc. and rolled and extruded products therefrom namely sheets, strips, profiles etc. They obtained bauxite ore from their own mines and extruded alumina therefrom using various chemicals. Molten aluminium is prepared from alumina by reduction process and the molten aluminium is siphoned off into crucibles. From there, the molten aluminium is taken to the re-melting and casting shop, poured into oil fired melting furnace, into which aluminium scrap, alloy ingots etc. are also added and allowed to melt. The melt is then subjected to fluxing and degassing and then transferred to holding furnace. In the melting furnace and holding furnace, the top layer is exposed to the atmosphere and gets oxidised and a thin layer/film is thus formed which is removed by manual skimming operation. The learned Counsel submits that the refuse or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 46 wherein the benefit of proforma credit was extended to aluminium contained in aluminium dross arising in the course of its manufacture. The Revenue had sought to rely upon the proviso to sub-rule (2) of Rule 56A to deny proforma credit, treating aluminium dross as finished excisable goods and since these were exempt from duty, credit was not available on any material or component parts used in its manufacture. However, the High Court, apart from holding that dross is not goods, further held that aluminium sheets were the end product or finished product and not dross and skimmings which were merely the refuse of skimmings drawn out of the manufacture of the finished product. The learned Counsel submits that the Adjudicating Authority has wrongly distinguished the judgment of the Bombay High Court on the ground that the dross and skimmings in that case were non-excisable whereas in the impugned order, they have been held to be excisable commodities because the conclusion of the High Court that dross and skimming are not finished excisable goods, was based upon the reasoning that only aluminium sheets can be considered as finished excisable goods. The learned Counsel also relies up ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the availment of Modvat by the appellants. Hence, the charge of suppression cannot be levelled against them. 6. Replying to the arguments of the learned Counsel, Sh. K.K. Dutta, learned DR submits that aluminium dross, pot dug out material and furnace dug out material are excisable goods covered under sub-heading 2620.00 as they are residues arising in the course of manufacture of aluminium and products thereof. He refers to Note 3 to Chapter 26 and submits that since the residues are admittedly used in industry for extraction of metals, they are excisable goods. In view of the specific coverage of such residues in Chapter 26, the judgment of the Hon ble Supreme Court in the case of Collector of Central Excise v. Indian Aluminium Co. - 1995 (77) E.L.T. 268, which was rendered in the context of old Tariff is not applicable in the context of the new Tariff. He cites the decision of the Tribunal in the case of D.K. Electricals - 1994 (74) E.L.T. 272, holding that conversion of GI steel wires falling under sub-heading 7217.90 into PVC coated insulated wires falling under sub-heading 8544.00 amounts to manufacture in terms of Section 2(f) of the Central Excises and Salt Act, 1944, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aluminium angles, etc. out of aluminium lingots. In the process of manufacture, at the stage of processing, dross and skimming arise and accumulate in the furnace in the shape of ashes as a result of oxidisation of metal. These ashes are formed mainly during the melting down of aluminium ingots and, to some extent, during subsequent treatment and holding operation of molten baths in the furnace. Dross consists mostly of oxides, non-metallic material and other foreign material which separates or dorms during melting and holding operations, and finally accumulates on the surface of the molten bath. It has to be removed. Skimmings are mostly thin oxide layers obtained by skimming a molten bath prior to metel transfer on casting. The skimming operation is essential to the manufacture process. Dross and skimmings, according to the assessees, represent a process-loss or a melt loss. Aluminium dross and skimmings contain a certain amount of metal from which they come. But they lack not only metal body but also metal strength, formability and character. Such dross and skimmings are, therefore, distinct from scrap which is a metal of as good a quality as the prime metal from which it arises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no material change in the definition of manufacture as contained in Section 2(f) of Central Excises and Salt Act, 1944 prior to 1-3-1986 and thereafter and (b) Entry in the Tariff viz. Heading 26.20 covers Ash residues other than from the manufacture of iron and steel containing metals or metallic compounds is not per se sufficient for determining the excisability without determining whether the items came into existence as a result of manufacture, as held by the Hon ble Supreme Court in the case of Bhor Industries Ltd. v. Collector of Central Excise - 1989 (40) E.L.T. 280 (SC). The Supreme Court has held therein that, in order to be goods, an article must be something which can ordinarily come to the market and is brought for sale and must be known to the market as such. The Court held that the essential ingredient for levying duty of Excise is that there should be manufacture of goods and simply because a certain article falls within the Schedule, it would not be dutiable under Excise law if the said article is not `goods known to the market. Marketability therefore, is an essential ingredient for dutiability under the Schedule to the Central Excise Tariff Act, 1985. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation to any goods in the Section or Chapter notes of the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture, and the word `manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account." 13. As per the Central Excise Tariff Act, 1985 The rates at which duties of excise shall be levied under the Central Excises and Salt Act, 1944 (1 of 1944) are specified in the Schedule. 14. The Central Excise duty is a tax levied with reference to `goods and relevant part of Section 3 of the Central Excises and Salt Act reads as follows :- Section 3. Duties specified in the Schedule to the Central Excise Tariff Act, 1985 to be levied. - (1) There shall be levied and collected in such manner as may be prescribed duties of excise on all excisable goods other than salt which are produced or manufactured in India and a duty on salt manufactured in, or imported by land into, any part of India as, and at the rates, set forth in the Schedule to the Central Excise Tarif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the Official Gazette specify in this behalf. 19. Dross and skimming or ashes, deemed to be goods, as per legal fiction cannot, however, be considered as `finished products by any stretch of imagination. They are not deliberately manufactured and none of the processes or activities are designed to produce them but they arise unavoidably due to chemical and technical or technological reasons during the course of manufacture of the `finished excisable goods . Hence, it was not necessary to make any declaration under 57A about them. Not only that, the Modvat taken with reference to finished excisable goods could not be disallowed or reduced on account of such ash or residues because de facto they remain in the nature of waste, refuse or by-product, as the case may be, and therefore, rule 57D comes to the rescue of the assessees. 20. In view of the above observations and findings, neither any duty is demandable nor any penalty is imposable. 21. I, therefore, agree with the findings of my learned colleagues to the extent that the fact of their non-declaration as final product under Rule 57G does not amount to suppression on their part. Their non-declaration in the classif ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
