2016 (3) TMI 846 - AT - Central Excise

100% EOU - Liability in terms of condition no.7 of notification no.53/97-Cus dated 3.6.1997 - Held that - Hon ble Supreme Court in Indian Aluminium Co. Ltd. (2006 (9) TMI 6 - SUPREME COURT OF INDIA) held that though dross and skimming do arise during the process of manufacture but these are not manufactured products. An article is not exigible to tax only because it may have some saleable value. The Supreme Court concluded that dross is not a manufactured product. Also zinc skimming and dross arising as by-products during galvanization are not manufactured excisable products. See SHRI RAM AGRO CHEMICALS (P) LTD. Versus UNION OF INDIA 2008 (10) TMI 95 - PUNJAB & HARYANA HIGH COURT A perusal of condition no.7 of the said notification will show that customs duty is payable only when imported goods are used for the purpose of manufacture of such articles (here zinc, dross, etc.). The settled legal position is that these are not manufactured items. Hence, on this ground alone, the present impugned order confirming the duty demand will not survive. We noticed further that the various demands issued to the appellants did not specify the legal basis or reason for such demand of customs duties. They indicated that in the event of the impugned goods were found to be non-excisable, then customs duty is payable. Apparently, such conditional and provisional demands are not legally sustainable. - Decided in favour of assessee

Summary

Issues: Duty liability and quantification of duty relating to zinc scaling/dross/ash arising in the course of production of galvanized pipe.

In this case, the appellants, a 100% EOU engaged in manufacturing galvanized M.S. Pipe, imported zinc without payment of customs duty under a specific notification. The dispute arose regarding the duty liability of zinc scaling/dross/ash generated during the production process. The original authority confirmed the demands to recover customs duty, which was upheld by the ld. Commissioner (Appeals). The appellants contested the findings, arguing that the impugned goods were not manufactured items and hence the notification's provisions did not apply. They also raised concerns about overlapping demands, lack of clarity on the type of duty being demanded, and inconsistencies in the impugned order. The ld. AR supported the findings, stating that the products had marketability and were excisable goods.

Upon examination, the Tribunal considered the liability of the appellants under the notification's condition. Referring to legal precedents, including decisions by the Hon'ble Supreme Court and High Courts, it was established that zinc scaling, dross, etc., were not manufactured excisable products. The Tribunal noted that the customs duty was payable only when imported goods were used for manufacturing such articles, which, in this case, were not considered manufactured items. Therefore, the impugned order confirming the duty demand was deemed unsustainable on this ground.

Furthermore, the Tribunal observed that the demands issued to the appellants lacked specificity regarding the legal basis or reason for the customs duty demand. Conditional and provisional demands without clear legal grounds were deemed legally unsustainable. Consequently, the Tribunal set aside the impugned order, ruling in favor of the appellants and allowing the appeal.