1980 (9) TMI 275 - Board - Central Excise

Summary

Issues Involved:
1. Classification of aluminium dross/ash under Central Excise Tariff Item 68.
2. Applicability of Rule 9(1) and 9(2) of the Central Excise Rules.
3. Imposition of penalties under Rule 173Q.

Detailed Analysis:

1. Classification of Aluminium Dross/Ash:
The primary issue was whether aluminium dross/ash is classifiable under Item 68 of the Central Excise Tariff. The appellants cited the Bombay High Court judgment in the case of Indian Aluminium Company Limited v. A.K. Bandyopadhyay, which held that dross and skimmings are not "goods" as they are merely refuse or scum resulting from the manufacturing process. The court observed that "goods" must be something that can ordinarily come to the market and be bought and sold, and that the "manufacture" liable to excise duty must bring into existence a new substance known to the market. The Board agreed with the High Court's view, concluding that aluminium dross/ash is not liable to be charged to duty under Item 68 of the Central Excise Tariff.

2. Applicability of Rule 9(1) and 9(2):
The appellants argued that the Excise authorities had full opportunity to levy and collect duty on the aluminium dross/ash at the time of manufacture and removal, as the goods were cleared under factory challans and bills, which were available for inspection by the Central Excise Officers. The Board found that there was no intention to evade payment of duty on the part of the appellants, thus Rule 9(1) was not contravened. Consequently, the penal provisions under Rule 9(2) were not applicable. The demand for duty, if any, would be covered only by Rule 10 and Rule 10A as they existed at that time, but this was immaterial since the goods were not liable to duty.

3. Imposition of Penalties under Rule 173Q:
The Additional Collector had imposed a penalty of Rs. 5,000/- in each case under Rule 173Q. The appellants cited the Supreme Court's decision in Hindustan Steel Ltd. v. State of Orissa, which stated that penalties should not be imposed for technical breaches or where the breach follows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. The Board held that there was no mala fide intention to evade duty, and thus, the imposition of personal penalties was not warranted. The penalties were accordingly set aside.

Conclusion:
The appeals succeeded on all counts. The Board held that aluminium dross/ash is not liable to duty under Item 68 of the Central Excise Tariff, Rule 9(1) was not contravened, and the penalties imposed under Rule 173Q were unwarranted and set aside.