2011 (6) TMI 521 - AT - Central Excise

Classification - whether Zinc Dross amounts to manufacture - Ld. Counsel for the appellant submits that prior to the amendment of Central Excise Act vide Finance Act, 2008, zinc dross was not considered to be a manufactured item, even though zinc dross was specified in the Central Excise Tariff - The amendment made in March 2005 to the Central Excise Tariff wherein a specific heading was created for zinc dross under sub heading No.720010 will not make the goods excisable in the absence of a chapter note or a legal fiction to treat the goods as manufactured item - apex Court in the case of CCE, Patna Vs. Tata Iorn & Steel Co. Ltd., reported in 2004 (2) TMI 68 - SUPREME COURT OF INDIA , wherein it was held that zinc dross, flux skimming and zinc scalings arising as a by-product during galvanization of steel sheets, are not excisable goods - Circular No.904/24/2009-CX dated 28/10/2009 issued by the CBE&C, - Merely because an item is specified in the tariff chargeable to a rate of duty, it cannot be concluded that they are excisable goods, i.e., they are manufactured and marketable goods - Held that zinc dross arising in the process of galvanization of the C.R. Sheets cannot be considered to be a marketable and excisable products prior to May 2008 - Decided in favor of the assessee

Summary

Issues:
Classification of zinc dross under Central Excise Tariff Act, 1985 and liability for excise duty.

Analysis:
The case involved appeals against an order passed by the Commissioner of Central Excise, Raigad, classifying zinc dross under specific subheadings of the Central Excise Tariff Act and demanding excise duty, interest, and penalty. The appellant, a manufacturer of excisable goods, argued that prior to the amendment in the Central Excise Act in 2008, zinc dross was not considered excisable. They cited judicial precedents, including a Tribunal decision and Supreme Court judgments, to support their stance that zinc dross is not marketable and hence not excisable. The appellant also referenced a circular clarifying excisability of certain waste products post the 2008 amendment. The Departmental Representative, however, contended that zinc dross arising during galvanization should be considered manufactured goods exigible to excise duty based on specific subheadings in the tariff and marketability. The Departmental Representative relied on judicial precedents supporting excisability of similar products.

The Tribunal carefully considered the arguments and precedents cited by both parties. It noted that while zinc dross was specified in the Central Excise Tariff, mere specification did not automatically make it excisable. The Tribunal highlighted the absence of a legal fiction of manufacture for zinc dross and referenced Supreme Court judgments emphasizing that marketability is a crucial factor in determining excisability. The Tribunal distinguished the judgments cited by the Departmental Representative, stating they were not directly applicable to the present case. Additionally, the Tribunal referenced a circular clarifying excisability post the 2008 amendment, which supported the appellant's argument. Consequently, the Tribunal concluded that zinc dross arising during galvanization before May 2008 cannot be considered marketable and excisable goods. Therefore, the impugned order was set aside, and the appeals were allowed with any consequential relief.