2002 (8) TMI 168 - AT - Central Excise

Issues Involved:
1. Eligibility for exemption under Notification No. 208/83-C.E.
2. Classification of raw materials as re-rollable scrap.
3. Duty-paid status of inputs.
4. Applicability of the Larger Bench decision in Adarsh Re-rolling Mills.

Issue-Wise Detailed Analysis:

1. Eligibility for Exemption under Notification No. 208/83-C.E.:
The appellants, manufacturers of rolled products such as flats, bars, and rods, claimed the benefit of exemption under Notification No. 208/83-C.E., which provides exemption to specified final products made from duty-paid specified raw materials. The notification specifies that final products are exempt from excise duty if made from inputs on which excise duty or additional customs duty has been paid. The appellants argued that their inputs, re-rollable scrap, should be considered within the scope of this notification.

2. Classification of Raw Materials as Re-rollable Scrap:
The appellants contended that their inputs, re-rollable scrap obtained from ship breaking and purchased from the open market, should not be classified as waste and scrap under TI 25(3)(ii) or Chapter Heading No. 7203 or 7204. They referred to a Ministry's clarification dated 8-9-83, which differentiated re-rollable and industrial scrap from waste and scrap meant only for recovery of metal. This position was supported by Circular No. 27/89, dated 21-9-89, and the decision of the Larger Bench in Commissioner of Central Excise v. Adarsh Re-rolling Mills [2002 (143) E.L.T. 533 (T-LB)], which held that re-rollable scrap not meant for re-melting should be classified under other appropriate headings.

3. Duty-Paid Status of Inputs:
The appellants argued that goods cleared at nil duty should be treated as duty-paid, citing several circulars and the Supreme Court decision in Collector of Central Excise v. Usha Martin Industries [1997 (94) E.L.T. 460 (S.C.)]. They referred to various circulars, including those dated 16-4-1973, 6-12-1980, 8-9-1983, 28-7-1987, 7-9-1992, and 15-5-1995, which supported the interpretation that nil duty is also appropriate duty. However, the Supreme Court in Collector of Central Excise v. Dhiren Chemical Industries [2002 (139) E.L.T. 3 (S.C.)] held that goods made from raw materials on which no duty is paid are not eligible for exemption. Despite this, the Court also stated that if there were circulars placing a different interpretation, that interpretation would be binding on the Revenue, leading to the dismissal of appeals in Dhiren Chemical Industries based on existing circulars.

4. Applicability of the Larger Bench Decision in Adarsh Re-rolling Mills:
The appellants relied on the Larger Bench decision in Adarsh Re-rolling Mills, where it was held that re-rollable scrap used as inputs was eligible for exemption under Notification No. 208/83. The Revenue attempted to distinguish this case by arguing that the inputs in the present case were ship-breaking scrap, not scrap from condemned railway engines, and that there was no admission of the inputs being re-rollable material. However, the Tribunal found that the factual stand of the appellants regarding the receipt of re-rollable material from ship breaking was not rebutted by the adjudicating authority.

Conclusion:
The Tribunal held that the inputs used by the appellants fell within the specified inputs in the table annexed to Notification No. 208/83 and that the final products manufactured from such inputs were eligible for exemption. The Tribunal overruled the Revenue's objections regarding the classification and duty-paid status of the inputs, relying on the binding nature of the circulars and the Larger Bench decision in Adarsh Re-rolling Mills. Consequently, the impugned orders were set aside, and the appeals were allowed with consequential relief to the appellants.

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