1987 (6) TMI 181 - AT - Central Excise

Summary

Issues Involved:
1. Whether aluminium scrap is assessable to duty under Item 68.
2. Interpretation of the Supreme Court decision in Khandelwal Metal & Engineering Works v. Union of India.
3. Legislative competence and applicability of excise duty on waste and scrap.

Summary:

1. Whether aluminium scrap is assessable to duty under Item 68:
The Assistant Collector argued that aluminium scrap should be charged to duty under Item 68, claiming it had a separate characteristic and utility as a finished product. However, the Tribunal found this reasoning flawed, stating that scrap is not a finished product but a by-product of the manufacturing process. The Tribunal emphasized that scrap does not have a new name, character, or use that would classify it as a finished product for excise duty purposes.

2. Interpretation of the Supreme Court decision in Khandelwal Metal & Engineering Works v. Union of India:
The department's counsel relied on the Supreme Court's decision in Khandelwal, which discussed the imposition of excise duty on waste and scrap. The Tribunal clarified that the Supreme Court's decision was specific to the legislative competence of Parliament to impose duty on waste and scrap under Entry 26A(1b) of the First Schedule to the Central Excises and Salt Act, 1944. The Tribunal noted that the Supreme Court did not classify waste and scrap as goods but acknowledged them as by-products of the manufacturing process.

3. Legislative competence and applicability of excise duty on waste and scrap:
The Tribunal highlighted that the Supreme Court's ruling in Khandelwal was based on the specific entry for waste and scrap in the tariff, which justified their excisability. However, Item 68 did not have such specificity for scrap. The Tribunal also referred to the Delhi High Court's decision in Modi Rubber Limited, which ruled that waste and scrap obtained in the course of manufacture are not goods and are not subject to excise duty under Item 68.

Conclusion:
The Tribunal concluded that the assessment of aluminium scrap under Item 68 was incorrect and set aside the order. The Tribunal agreed with the reasoning that aluminium dross and skimmings are not goods and thus not subject to duty under Item 68, aligning with the Delhi High Court's decision in Modi Rubber Limited.