1987 (6) TMI 199 - AT - Central Excise

Summary

Issues Involved:
1. Whether aluminium dross and skimmings are liable to duty under TI 68.
2. Whether the explanations in Item 68 would be attracted in this case.

Issue-wise Detailed Analysis:

1. Whether aluminium dross and skimmings are liable to duty under TI 68:

The appellants argued that aluminium dross and skimmings are not "goods" and hence not excisable. They relied on the Bombay High Court judgment (1980 E.L.T. 146) which held that dross and skimmings are not goods but refuse or rubbish. The appellants admitted that aluminium dross is a saleable commodity with commercial and industrial uses. However, they contended that despite its marketability, it does not qualify as "goods" under the Central Excise Tariff.

The Tribunal considered the legislative changes post-1975, including the introduction of residuary Item 68 and the amendments in 1980 and 1981. The 1981 amendment specifically excluded dross and skimmings from the definition of "waste and scrap" under Item 27 but did not render them non-excisable. The Tribunal applied the Supreme Court's test from the South Bihar Sugar Mills case, which defines "goods" as items that can ordinarily come to the market to be bought and sold. Since the appellants admitted that their aluminium dross is marketed and has industrial uses, the Tribunal concluded that aluminium dross is "goods" and falls under the residuary Item 68.

However, Member M. Santhanam dissented, holding that the Bombay High Court's judgment governs the issue and that aluminium dross cannot be considered "goods" under Section 3 of the Central Excise Act. He noted that the judgment had been affirmed by the Division Bench of the Bombay High Court and followed by the Tribunal in other cases. He argued that the explanations in Item 68 do not apply to dross and skimmings, which are merely waste and not excisable goods.

2. Whether the explanations in Item 68 would be attracted in this case:

The Tribunal discussed the 1980 amendment to Item 68, which added an explanation to clarify that goods excluded from specific items in the tariff could still be classified under Item 68 if they are marketable. The Tribunal held that the exclusion of dross and skimmings from Item 27 did not make them non-excisable. Instead, their marketability and industrial use brought them within the scope of Item 68.

Member M. Santhanam disagreed, stating that the explanation to Item 68 does not apply to dross and skimmings. He argued that the exclusion of dross and skimmings in the explanation to Item 27 was for clarifying the definition of "waste and scrap" and did not imply that they should be classified under Item 68. He emphasized that dross and skimmings are not goods in the conventional sense and cannot be considered excisable under Item 68.

Final Decision:

The Tribunal upheld the lower orders and rejected the appeal, concluding that aluminium dross is "goods" and falls under Item 68. However, Member M. Santhanam dissented, arguing that aluminium dross is not "goods" and should not be classified under Item 68. The matter was referred to the Hon'ble President for resolution of the difference in opinion.

President's Decision:

The President reviewed the arguments and previous decisions, including the Bombay High Court judgment and the Tribunal's earlier rulings. He concluded that aluminium dross and skimmings are not "goods" and therefore not excisable. He emphasized that the Tribunal is bound to follow the Bombay High Court's decision and its own previous rulings. The President's decision was based on the present state of the law, which holds that aluminium dross and skimmings are not goods and not liable to duty under Item 68. The cases were referred back to the original Bench for final orders in light of this decision.