1994 (12) TMI 73 - SC - Central Excise

Whether scrap obtained by the appellant in course of manufacture of iron and steel and steel products was dutiable under Item 26 or 26AA of the Tariff Schedule? Held that - Price fixation by Controller of Iron and Steel could not furnish basis for interpreting the entry, for levying duty under the Central Excises & Salt Act, 1944. The Controller might have classified scrap depending on size and terming it as rolling, melting and industrial scrap but that could not render it as semi-finished steel products. Size of scrap may be relevant for fixation of price but it could not reflect on the nature of scrap. Appeals are allowed and the order passed by the Tribunal is set aside. The question of law raised by the appellant is decided by saying that the scrap cleared by the appellant in each year having been melted and re-used as iron ingots was remelting scrap dutiable under Item 26 of the Tariff Schedule.

Summary

Issues: Interpretation of Tariff Schedule regarding duty on scrap obtained during manufacture of iron and steel products.

Analysis:
1. The central issue in this case revolves around determining whether the scrap obtained by the appellant during the manufacturing process of iron and steel products should be classified as dutiable under Item 26 or 26AA of the Tariff Schedule.

2. The Tribunal initially included the scrap under Item 26AA, which deals with iron and steel products, based on the argument that the scrap resembled sub-standard steel products and was not strictly scrap as commonly understood in commercial terms. The Tribunal considered factors such as a price circular issued by the Controller of Iron and Steel and the size of the scrap in making this determination.

3. However, a letter exchange between the Assistant Collector of Central Excise and the Director of Inspection (Metallurgical) highlighted the inadequacy of classifying scrap solely based on size. The Director emphasized that the classification of scraps should not solely rely on size and mentioned that scrap generated in steel manufacturing operations, known as "arisings," is typically treated as melting scrap in developed countries and India.

4. The Court emphasized the distinction between scrap and semi-finished products, noting that scrap is typically considered waste but can be reused for re-rolling or re-melting to produce raw material for finished products. The definition of melting scrap was also discussed, highlighting that scrap suitable for melting in furnaces should be classified as melting scrap.

5. The Court rejected the Tribunal's reasoning, stating that the price classification by the Controller of Iron and Steel based on size could not be the basis for interpreting the Tariff Schedule. The size of the scrap may be relevant for pricing but does not determine the nature of the scrap for duty classification purposes.

6. Ultimately, the Court allowed the appeals, setting aside the Tribunal's order and ruling that the scrap cleared by the appellant, which was melted and reused as iron ingots, should be classified as re-melting scrap dutiable under Item 26 of the Tariff Schedule.

7. The appellant was awarded costs in the case, concluding the legal proceedings on this matter.