2011 (7) TMI 867 - AT - Central Excise

whether the zinc ash and dross emerging during the process of galvanization of steel sheets/pipes would be excisable product and, therefore, dutiable - As rightly pointed out by the learned advocate, the matter relates to period prior to May 2008 and the explanation clause was added to Section 2(d) of the Central Excise Act under Finance Act, 2008 came into force from 10th May 2008 - Apex Court in Tata Iron & Steel Co. Ltd. case wherein it was held that Merely because such refuse or scum may fetch some price in the market does not justify it being called a by-product, much less an end-product or a finished product - Appeal is allowed

Summary

Issues:
Whether zinc ash and dross emerging during the process of galvanization of steel sheets/pipes are excisable products and dutiable.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi arose from an order passed by the Commissioner (Appeals), Noida, confirming a demand of Rs. 47,17,745/- along with interest and penalty imposed by the Additional Commissioner, Noida. The key issue was whether zinc ash and dross resulting from the galvanization process are excisable goods and thus subject to duty.

The advocate for the appellants argued, citing relevant legal precedents, that the lower authorities erred in considering zinc ash and dross as excisable products. Referring to decisions like CCE v. Tata Iron & Steel Co. Ltd. and Vishal Pipes v. CCE, Noida, it was contended that the product in question does not fall under excisable goods as per the definition in force during the relevant period. Therefore, the provisions of Rule 6(2) of the Cenvat Credit Rules should not apply.

On the contrary, the Departmental Representative (DR) contended that zinc ash and dross do emerge during the galvanization process, justifying the demand based on Rule 6(2) of the Cenvat Credit Rules.

The Tribunal referred to the Supreme Court's decision in the Tata Iron & Steel Co. Ltd. case, which clarified that such by-products like zinc dross and skimming are not excisable goods. Similarly, in the Vishal Pipes case, it was held that goods like zinc ash and dross generated during the galvanization process are not excisable goods as they do not involve a manufacturing process.

The Tribunal highlighted that the matter pertained to a period before May 2008 when an explanation was added to the definition of excisable goods under the Central Excise Act. This addition clarified that excisable goods include items capable of being bought and sold for consideration, emphasizing marketability.

Considering the legal provisions, precedents, and definitions applicable during the relevant period, the Tribunal concluded that the product in question, zinc ash and dross, is not excisable. Therefore, the demand based on Rule 6(2) of the Cenvat Credit Rules was not justified. The appeal was allowed, setting aside the impugned order and providing consequential relief to the appellants.