1988 (10) TMI 146 - AT - Central Excise

Summary

Issues:
1. Interpretation of Notification No. 150/77 regarding exemption of scrap.
2. Application of Indian Standard Specification (ISI) in determining classification of scrap.
3. Effect of ISI clarification and subsequent amendment on the classification of scrap.
4. Imposition of penalty on the basis of misclassification of scrap.

Analysis:
1. The case involved the interpretation of Notification No. 150/77, which exempted scrap known as 'Butts and Shorts' under certain conditions. The appellant company, engaged in manufacturing iron and steel products, was accused of clearing sheet scrap wrongly labeled as 'Butts and Shorts,' leading to a demand for duty and a penalty by the Collector of Central Excise.

2. The Collector based the decision on the Indian Standard Specification (ISI) No. 1956-62, which defined 'shorts' as the portion left after specific lengths are cut from a long sheet. The Collector concluded that the scrap in question, consisting of sheet side trimmings or cut ends obtained during steel sheet trimming, did not qualify as 'butts and shorts' under the notification.

3. The appellant argued that the ISI clarification in 1984, culminating in a formal amendment in 1987, expanded the definition of 'Butts' to include cuts in width, which should be applied retroactively. The appellant contended that the amendment corrected an anomaly and should be considered in the classification of scrap.

4. The imposition of a penalty of Rs. 500 on the appellant was based on the allegation of deliberate misclassification to evade duty. However, the Tribunal, after considering the arguments and the ISI standards, concluded that the penalty should be set aside as the scrap classification should be based on the amended ISI definition, which included cuttings from both length and width.

5. The Tribunal emphasized that the ISI specification, being from recognized experts in the field, was an acceptable guide for classification. The Tribunal accepted the amended ISI definition of 'butts' and 'shorts,' which encompassed portions removed by cutting or shearing from rolled products, including cut bars left after specified lengths are removed.

6. In light of the amendment to the ISI standards in 1987, the Tribunal held that the scrap in question should be classified according to the updated definition, and the penalty imposed on the appellant was set aside, allowing the appeal in favor of the appellant company.