2021 (3) TMI 153 - AT - Central Excise

Process amounting to manufacture - Department entertained a view that the scrap arising out of such activity of cutting and slitting of steel coils is covered under the definition of waste and scrap mentioned in Note 8 to Section XV of the Central Excise Tariff Act, 1985 and therefore, the same is liable to Excise Duty - HELD THAT - The C.B.E.C. vide Circular No. 811/8/2005-CX dated 02.03.2005 has clarified that the process of cutting of HR/CR coils of iron or non-alloy steel into sheets or slitting into strips of lesser width would not amount to manufacture. So also, in the case COMMISSIONER OF CENTRAL EXCISE VERSUS INDIAN ALUMINIUM CO. LTD. 2006 (9) TMI 6 - SUPREME COURT it has been held that the process of cutting/slitting of jumbo coils into baby coils/sheets would not amount to manufacture. When the process of cutting and slitting itself does not amount to manufacture within the meaning of Section 2 (f) of the Central Excise Act, 1944, scrap arising out of such activity cannot be subjected to Excise Duty for the simple reason that the appellant has not consciously manufactured any waste or scrap. Emergence of such waste and scrap of iron is incidental to the activity of slitting and cutting of bigger coils into smaller ones - The very same issue was decided by the Tribunal in the case of RAIL COACH FACTORY VERSUS COMMISSIONER OF CENTRAL EXCISE, JALLANDHAR 2008 (7) TMI 787 - CESTAT, NEW DELHI . Notification No. 89/95-CE dated 18.05.1995 issued by the Department also supports the contentions of the assessee. Appeal allowed - decided in favor of appellant.

Issues involved:
1. Whether the scrap arising from cutting and slitting of steel coils is liable to Excise Duty.
2. Whether the activity of slitting and shearing of coils amounts to manufacturing.
3. Interpretation of relevant legal provisions and precedents.

Analysis:

Issue 1: Liability of Excise Duty on scrap arising from cutting and slitting of steel coils
The Department contended that the scrap arising from cutting and slitting of steel coils falls under the definition of 'waste and scrap' in the Central Excise Tariff Act, 1985, and is thus liable to Excise Duty. A Show Cause Notice was issued to demand Central Excise Duty on the waste and scrap manufactured and cleared by the appellants. The Original Authority initially dropped the proceedings, but the Commissioner (Appeals) reversed this decision, leading to the appeal before the Tribunal.

Issue 2: Manufacturing activity in slitting and shearing of coils
The appellant argued that the activity of slitting and shearing of coils does not amount to manufacturing. They emphasized that no new product distinct from the original emerges from this process. The appellant cited legal precedents, including a decision by the Hon'ble High Court of Jharkhand and a case involving waste and scrap arising during manufacture to support their contention.

Interpretation of legal provisions and precedents
The Circular issued by the Central Board of Excise and Customs clarified that cutting of coils into sheets or slitting into strips does not constitute manufacturing. Legal precedents, such as judgments in cases involving cutting/slitting of coils into smaller units, have established that such activities do not amount to manufacturing. The Tribunal's decision in a similar case further supported the argument that scrap arising incidentally from cutting and slitting activities should not be subjected to Excise Duty.

Conclusion
After considering the arguments and legal provisions, the Tribunal concluded that the demand for duty on scrap arising from cutting and slitting of steel coils cannot be sustained. The impugned order was set aside, and the appeal was allowed with consequential reliefs, if any, as per the law.

This detailed analysis of the judgment highlights the key issues involved, the arguments presented by the parties, relevant legal provisions, and the Tribunal's decision based on the interpretation of the law and precedents.

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