TMI Blog1997 (2) TMI 104X X X X Extracts X X X X X X X X Extracts X X X X ..... duty on account of the concerned exemption Notification. Thus the impugned demand of duty on the supposed embedded input of pig iron which resulted into the steel melting scrap were clearly unauthorized and incompetent. The appellant is entitled to succeed on this ground alone. In the result, the appeal is allowed. - 2766 of 1991 - - - Dated:- 20-2-1997 - S.P. Bharucha and S.B. Majmudar, JJ. [Judgment per : S.B. Majmudar, J.]. - This appeal under Section 35(L) of the Central Excises Salt Act, 1944 (hereinafter referred to as `the Act') is brought by the appellant-assessee on being aggrieved by the decision rendered by the Customs, Excise and Gold (Control) Appellate Tribunal (CEGAT) for short) dismissing the assessee's appeal against the order in original passed by the Collector of Central Excise, Bolpur. 2.A few relevant facts leading to this appeal deserve to be noted at the outset. The appellant, Steel Authority of India Ltd. is a wholly owned Government of India Company. The appellant-company has several steel plants and Durgapur Steel Plant (DSP), situated at Durgapur in West Bengal, is one of the integrated steel plants of the appellant-company. DSP manufact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terms of Notification No. 150/77, dated 18-6-1977 as amended by Notification No. 209/77, dated 2-7-1977. This practice of removal of steel melting scrap as per the procedure laid down by the aforesaid notification was being followed by the appellant-company since the date of the said notification i.e. 18-6-1977. 4.The facts leading to the present proceedings stem out of the show cause notices issued to the appellant-company by the Superintendent of Central Excise, Durgapur. The first show cause notice dated 21-11-1980 alleged that the appellant-company had not paid duty on the iron contained in crude form in `steel melting scrap'. It was alleged in the said show cause notice that as per Tariff Item 25 iron in crude form attracted central excise duty @ Rs. 70/- per metric ton and there was no clear exemption from payment of duty on iron used for manufacturing of steel ingots and steel melting scrap. That Notification No. 18/71-C.E., dated 27-3-1971 provided a set-off of duty paid on iron in crude form against the duty payable on steel ingots and steel melting scrap. It was further alleged in the show cause notice that since specified steel melting scrap was chargeable to nil rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... products but not scrap. Scrap was not a conscious production. That the iron in crude form which had not borne duty at the time of its production had already resulted in the manufacture of duty paid steel ingots. Even in the light of Notification No. 18/71-C.E., dated 23-3-1971 full excise duty was paid by the appellant-company on the steel ingots which were the ultimate product manufactured by the appellant by utilising the entire input of iron in crude form. Hence, even if set off of duty on utilised iron in crude form was not available as duty was not paid at the relevant time when iron in crude form was manufactured, save and except demanding full duty on manufactured steel ingots, there would remain no occasion for the revenue to bring to tax the very same utilised iron in crude form which during the process of manufacture of the final product of steel ingots might have resulted in a by-product like steel melting scrap which in its turn was fully exempted from the excise duty because of Notification No. 150/77. According to the learned counsel for the appellant, the impugned notices of demand and the final order of adjudication even for a period of six months immediately preced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion remains as to whether the input of pig iron ultimately bears the full burden of excise duty as leviable on the said pig iron at a stage when the said input results into the final product. We may note at this stage that at the relevant time, the tariff item concerned which made the input of pig iron exigible to excise duty was Tariff Item 25 and the rate of duty was Rs. 70/- per metric ton. The final products which resulted by utilising this input, as noted above, were steel ingots as well as steel melting scrap. Both of them were covered by Tariff Item 26 and were liable to tax @ Rs. 350/- per metric ton. There was Tariff Item 26AA which dealt with iron or steel products which were manufactured by utilising steel melting scrap as an input by the appellant-company and those steel products enumerated in the said Entry 26AA were of various types and were liable to bear excise duty as mentioned in the said tariff item. The short question for our consideration is whether pig iron in crude form which was utilised as an input by the appellant-company in manufacturing the final products of steel ingots and steel melting scrap had been subjected to full payment of excise duty under Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was exigible to central excise as per Tariff Item 26 @ Rs. 350/- per metric ton and which had utilised the same input of crude iron, namely, pig iron could be said to have accounted for payment of excise duty on input of crude iron which was fully utilised by it when it got manufactured in the steel melting furnace as a result of the same and uniform manufacturing process. The basis of the impugned show cause notices which in their turn got upheld by the CEGAT to the extent of six months demands prior to the dates of issue of these notices, being Notification No. 18/71, dated 27-3-1971 is, therefore, required to be reproduced. The said notification reads as under :- "18/71-C.E., dated 27-3-1971 amended by 109/80-C.E., dated 19-6-1980 In exercise of the powers conferred by Rule 8(1) of the Central Excise Rules,1944,and in supersession of the notification of the Government of India in the a M.F.(D.R. I) No.67/78-C.E., dated 30.03.1968, the Central Government hereby exempt : (a) Steel ingots falling under Item No.25 of the First Schedule to the Central Excises and Salt Act,1944 (1 of 1944), and (b) iron or steel products falling under Item No.26AA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being available or even tried to be produced by the respondent-department on the record of this case, it is impossible to bifurcate and try to find out as to what part of the input of pig iron resulted into the manufacturing of steel ingots and what part of the very same input of pig iron got embedded in the emerging by-product of steel melting scrap. In the absence of such bifurcation, the impugned notices would obviously result in double taxation on the input of pig iron which got embedded in steel ingots that became liable to bear full excise duty and for which there is no dispute between the parties. As the process for manufacturing steel ingots by utilising the input of crude iron was a single uniform process, such bifurcation even otherwise was not possible even if it was so attempted by the respondent-department. The impugned show cause notices make clear, in this connection, that they seek to levy basic excise duty for the relevant period on the entire input of pig iron by seeking to bring it to tax on the basis of the entire output of steel melting scrap. In other words, these notices seek to equate total quantity of steel melting scrap with the embedded proportionate inp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 100 metric tons of pig iron, 90 metric tons of steel ingot and 10 metric tons of steel melting scrap emerged. So far as 10 metric tons of scrap was concerned, it was not exigible to excise duty as per the exemption Notification No. 150/77, dated 18-6-1977, as noted earlier. So far as 90 metric tons of steel ingots are concerned, the excise duty payable thereon as per Tariff Item 26 was Rs. 350/- per metric ton. Therefore, accordingly 90 metric tons of steel ingots would have been required to bear total excise duty of Rs. 31,500/- (90 metric tons x Rs. 350/-). Towards this total liability of Rs. 31,500/- of excise duty on the final product of the steel ingots, the appellant would have been entitled to a set off of Rs. 7,000/- in all as it had utilised 100 metric tons of pig iron as input for manufacturing this 90 metric tons of steel ingots especially in the absence of there being any bifurcation of the input of pig iron between the final emerging products, namely, 90 metric tons of steel ingots on the one hand and 10 metric tons of steel scrap on the other. But that would have been possible if the input of 100 metric tons of pig iron had already been subjected to payment of excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the said Notification i.e. in all Rs. 31,500/-. If the benefit of the said Notification was not available, as in fact it is not available as the input of 100 metric tons pig iron had not borne any duty at the relevant time and the department had permitted the appellant to adjust it ultimately at the stage of manufacture of final product of 90 metric tons steel ingots which utilised the entire 100 metric tons of pig iron for its production, in the absence of separate bifurcation, the net result would still remain the same. Full excise duty of Rs. 31,500/- on 90 metric tons of steel ingots @ Rs. 350/- per metric ton without giving any benefit of adjustment would become available to the department. In either case, the appellant would be out of pocket to the requisite amount of Rs. 31,500/- by way of excise duty which would fully meet the department's demand of the full excise duty of Rs. 7,000/- payable on the total input of 100 metric tons of pig iron. When the amount of excise duty so recovered on 90 metric tons of steel ingots which had exhausted the entire pig iron, accounted for full duty on the entire quantity of input of pig iron, it is difficult to appreciate as to how the v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant steel melting scrap had a market value and was capable of being sold outside if not captively consumed by the appellant. In ground No. (v) B in the memo. of appeal, the appellant in this connection, has averred as under:- "Because Steel Melting scrap was exempted in terms of Notification No. 150/77, dated 18-6-1977 upon conditions mentioned therein. The conditions having been fulfilled, no central excise duty can be determined or demanded, on the said `steel melting scrap' when sold to the steel plants following the Chapter X procedure." It, therefore, cannot be urged by the learned counsel for the appellant that steel melting scrap was not an excisable commodity or that it could not be sold in the market. Consequently, the aforesaid decisions cannot be pressed in service by the appellant in the present case. However, as discussed earlier, the impugned demand of duty on the supposed embedded input of pig iron which resulted into the steel melting scrap were clearly unauthorized and incompetent. The appellant is entitled to succeed on this ground alone. In the result, the appeal is allowed, the judgment and order of the CEGAT is set aside, the impugned demands pursuant t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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