1997 (8) TMI 73 - SC - Central Excise

Whether off-cuts cannot be classified as sheets and their correct classification would be that of waste and scrap? Held that - The off-cuts which are used would clearly answer to the expression shape contained in Tariff Item 72.10. It does appear that the attention of the tribunal was not drawn to Tariff Entry 72.10 but on the facts, as found by the tribunal, it is clear that the off-cuts which are odd shaped and are used by the appellant do not answer to this description of sheet but, on the contrary, can only be regarded as shapes falling under Tariff Entry 7210.10. The rate of duty of this is ₹ 365/- per ton which is the same as that on waste and scrap of steel under Tariff Entry 7203.20. It is this duty of ₹ 365/- per ton which has to be paid by the appellant on those pieces of steel or off-cuts which are cleared by the appellant for use in the manufacture of ancillary items and not ₹ 715/- per ton as demanded by the respondent. The appellant, therefore, was entitled to clear the off-cuts of steel sheets by paying duty under Tariff Entry 72.10 at the rate of ₹ 365/- per ton. Consequently, this appeal is allowed and the orders of the Tribunal as well as the Assistant Collector and the Collector, Appeals, are set aside.

Summary

Issues:
Classification of off-cuts for excise duty calculation.

Analysis:
The appellant, engaged in manufacturing two-wheeler vehicles, used duty paid steel sheets to manufacture scooters and parts. Dispute arose over the classification of remaining portions of these sheets, termed as 'off-cuts'. The respondent argued these off-cuts should be classified as sheets and cleared at the duty rate of Rs. 715/- per ton. The appellant contended that the off-cuts should be classified as waste and scrap under Tariff Item 7203.20, with duty at Rs. 365/- per ton.

The appellant's argument was rejected by the authorities, leading to this appeal. The appellant's counsel argued that the remaining portions after manufacturing scooters were waste and scrap, with only some pieces used for ancillary items. The respondent argued that since the appellant claimed credit for sheets at Rs. 715/- per ton, the off-cuts should be classified under Heading 7212.32.

Three competing entries were considered, with Rule 4 of the Excise Rules stating goods should be classified under the heading most akin to them. The court analyzed definitions of waste and scrap, angles, shapes, sections, and sheets under Chapter 72 of the Tariff Act to determine the appropriate classification for the off-cuts used by the appellant.

It was concluded that the off-cuts used for ancillary items did not qualify as waste and scrap, nor did they meet the definition of sheets. The court found that the off-cuts fell under Tariff Entry 72.10 as 'shapes', with a duty rate of Rs. 365/- per ton. The appellant was deemed entitled to clear the off-cuts at this duty rate, overturning the lower authorities' decisions. The appeal was allowed, and costs were not awarded.

This judgment clarifies the classification of off-cuts for excise duty calculation, emphasizing the importance of aligning goods with the most appropriate tariff heading based on their characteristics and intended use.