TMI Blog2008 (7) TMI 79X X X X Extracts X X X X X X X X Extracts X X X X ..... hpur, while conducting surprise inspection on 30-10-1999 noticed, that the assessee had cleared various types of waste and scrap without payment of duty on the private invoices (other than those issued under Rule 52A) during the period October, 1995 to July 1999. Accordingly show cause notice was issued, demanding duty on scrap, calling upon the assessee to show cause, as to why the duty may not be recovered, and interest, and penalty etc. may not be imposed. The statement of the Vice-President Shri P.K. Jain were recorded on 8-4-1999 under Section 14(2) of the Central Excise Act, 1944, and he stated that various types of scrap viz. M.S. Scrap, Conveyer scrap, scrap of Wooden Boxes, Cartoons scrap, Bearing scrap, Cement bags scrap etc. had arisen in their factory, and that said scrap had arisen from packaging material of goods received for use in the factory, and from machine and parts, bearing, conveyer belts etc., which became unusable in the plant, during the course of manufacture of cement, that welding machine scrap, Heat Casting scrap, Liner plate scrap, steel scrap, 5 Kg. Packing machine scrap, Blow Bar Scrap, Grinding segment, Grinding Media, Electrical scrap, Cable scrap, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was Rs. 5,52,354/- (iii) Waste and scrap of containers/packing material of inputs. Under this head the duty charged was Rs. 54,049/-. 5. Then, the learned Commissioner proceeded to examine the leviability of excise duty on each of the category individually. In this process considering the waste and scrap of first category, it was found, that metal waste and scrap generated in the workshop was generated by cutting of metal plates, angles, channels, sheets etc., for making of parts of their plant and machinery, during the course of repair and maintenance, and that these are cut pieces/trimmings of metal, arising during making of parts, which were being replaced in place of old and worn out parts, although these are not resulting directly from the process of manufacturing of their final product i.e. Cement. However, the process undertaken by the assessee is definitely covered by the expression "mechanical working of metal" as given in the definition of waste and scrap. In the opinion of learned Commissioner, thus these goods satisfied the definition as contained in Section Note 8(a) of Section XV of the Central Excise Tariff. Learned Commissioner sought support from a judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peal learned counsel for the Revenue submitted, that the learned Commissioner (Appeals) had clearly put the scrap generated, into three categories, and had found the scrap of 2nd and 3rd category to be not leviable to excise duty, and found the scrap of first category to be leviable to excise duty, and it was now here the case of the assessee in appeal, that even the first category of scrap is not leviable to excise duty, or that the catagorisation made by the learned Commissioner is wrong. Not only this even the learned Tribunal has not found the exercise of catagorisation into three categories by the learned Commissioner (Appeals) to be incorrect, or unwarranted. In these circumstances, the findings recorded by the learned Tribunal shows, that the learned Tribunal has found the scrap to be arising during wear/tear of the machine and machinery, and not to be arising out of manufacturing activity, and has relied upon its judgment in Birla Corporation's case, while a look at the judgment in Birla Corporation's case would show, that in that case the goods related to second category of scrap, in the categories formulated by the learned Commissioner (Appeals), and was not a case with r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ightway coming to the Birla Corporation's case, relied upon by the learned Tribunal, it may be observed, that that was a case where liability was sought to be levied in respect of wear and tear/waste and scrap of capital goods, and had found, that scrap cleared cannot be said to be the goods manufactured, as that was only wear and tear/scrap arising during the use of capital goods, and as such did not fall within the ambit of Section 2(f) of the Act, and for the purpose of charging of the duty, the dismantling of the capital goods, and waste arising in that process, also cannot be said to be manufactured goods. In our view, thus this judgment clearly relates to the second category of scrap, as categorised by the learned Commissioner (Appeals), and not to the first category. Then, we may refer to another judgment of the learned Tribunal cited by the learned counsel for the Revenue, being in Budhewal Co-op Sugar Mills Ltd.'s case . A look thereat shows, that in that case, the duty was claimed on the sale of MS scrap generated in the workshop of the assessee, whereon duty was affirmed. It was also found, that no duty has been demanded in that case on sale of old parts of the machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be exigible to excise duty. 15. The next judgment relied upon by the assessee is, Elphinstone Metal Rolling Mills' case. In our view that case need not detain us, because that is entirely different case, on facts, as well as legal proposition, inasmuch as, in that case the question was, as to whether the copper circles or sheets manufactured from copper scrap and copper wire bars, copper wire rods and castings, copper slabs and billets would be leviable to excise duty, where the prescribed amount of duty has been paid on the copper or copper content of alloys, in which event it would be exempted, therefore, this case has no bearing either ways. 16. Then, we come to WIMCO Ltd.'s case. In that case the waste was, the waste, scrap and parings of paper and paper board, generated during manufacture of printed paperboard boxes, and it was found, that the scrap is not new, distinct in name, character and use, and hence was not found to be dutiable. It was further held in this judgment, that merely because there is a tariff entry, goods would not become excisable, unless manufacture is involved. In our view, this judgment helps the assessee, to the extent it propound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 20. Thus, from a reading of this provision it is clear, that it includes any process incidental or ancillary to the completion of a manufactured product, and if it is specified in relation to any goods, in the section or Chapter Notes of the First Schedule to the Central Excise Tariff Act, as amounting to 'manufacture', and is to be construed to be including, not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in the production or manufacture, on his own account. 21. Thus, in our view, firstly any process incidental or ancillary to the completion of a manufactured product also amounts to manufacture, and secondly, it is not necessary that the scrap should emerge in the process of manufacture of an excisable goods only, or in the process of manufacture of the end product only. 22. Now, we come to the factual aspect of the matter. In our view, the learned Commissioner (Appeals) has rightly put the entire lot of scrap in three categories, and the catagorisation has not been assailed by either side as well. Likewise the scrap falling in category (ii) and (iii) have not been found to be excisable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factures the same in his factory premises itself, i.e. in the workshop, in our view, it cannot be said, that metal waste or the scrap, generated in that process, would not be a scrap generated as a result of manufacturing process. The repair and maintenance may require replacement of a floor sheet of a machinery, which sheet may require particular specification, in its thickness, metal properties, heat and cold resistance, and so many other aspects. Likewise, it may be some pipe, some tube, some plate, some pulley, or the like, at times it may be required to be fitted by nuts and bolts, at times it may be required to be fitted by heat process, while at times it may be required to be fitted by welding process, and in those events, the bringing about of the part concerned in existence in the workshop by a mechanical process, from out of plates, sheets, channels, beams, angles, welding electrodes etc. would definitely amount to manufacturing process, and if metal waste, and/or its scrap is generated in the course of manufacturing, in our view, there is no escape from the conclusion, that such metal waste, and scrap, would be exigible to excise duty. 25. It is a different story, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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