2024 (6) TMI 618 - AT - Central Excise

Excisability - waste and scrap arising during the course of manufacture of insulated electrical wires and cables - HELD THAT - In DSCL Sugars Ltd 2015 (10) TMI 566 - SUPREME COURT , the Hon ble Supreme Court had before it the issue of dutiability of bagasse emerging during production of sugar and, though earlier held as non-dutiable in Commissioner of Central Excise, Allahabad v. Balrampur Chini Mills Ltd 2010 (7) TMI 974 - SC ORDER , for the period after insertion of Explanation it was held that ' the word manufacture shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production of manufacture on his own account.' The waste and scrap arising during the process of manufacture of insulated electrical wires and cables are not liable to duties of excise combined with determination that the insertion does not alter the fundamental step of manufacture, the impugned orders lack merit - appeal allowed.

Issues Involved:
1. Dutiability of 'waste and scrap' arising during the manufacture of 'insulated electrical wires and cables.'
2. Classification of 'waste and scrap' under specific tariff items in the Central Excise Tariff Act, 1985.
3. Impact of the insertion of the Explanation in Section 2(d) of the Central Excise Act, 1944 on the definition of 'excisable goods.'
4. Relevance of previous judicial decisions on the dutiability and classification of 'waste and scrap.'

Issue-wise Detailed Analysis:

1. Dutiability of 'Waste and Scrap':
The primary contention was whether 'waste and scrap' generated during the manufacturing process of 'insulated electrical wires and cables' are subject to central excise duty. The Commissioner of Central Excise, Pune-I, held that these goods are products of 'manufacture' and thus liable to duty under Section 3 of the Central Excise Act, 1944. This was supported by the fact that these goods are covered by specific headings in the Schedule to the Central Excise Tariff Act, 1985, and are 'marketable' as evidenced by their sale in the market.

2. Classification under Specific Tariff Items:
The classification of 'waste and scrap' was reassigned to tariff item 7404 0019 of the Schedule to the Central Excise Tariff Act, 1985, based on the predominance of 'copper.' Subsequently, a corrigendum issued on 30th May 2013 reclassified the goods under tariff item 7602 0090 due to the predominance of 'aluminum.' The Commissioner confirmed the recovery of Rs. 1,19,66,698 and Rs. 81,59,711 for the respective periods under these classifications.

3. Impact of the Explanation in Section 2(d):
The insertion of the Explanation in Section 2(d) of the Central Excise Act, 1944, effective from 10th May 2008, was a significant point of contention. The Explanation states that "goods" include any article, material, or substance capable of being bought and sold for consideration, deeming such goods marketable. The appellant argued that this insertion did not alter the fundamental requirement of 'manufacture' for dutiability. The Tribunal noted that the non-discharge of liability after May 2008 and the absence of proceedings for recovery of duties prior to this date indicated that the Explanation did not supplant the necessity of 'manufacture.'

4. Relevance of Previous Judicial Decisions:
The appellant cited several decisions to support their contention that 'waste and scrap' are not dutiable. These included:
- Finolex Cables Ltd v. Commissioner of Central Excise, Pune (1996, 1997, 1998), where the Tribunal held that 'waste and scrap' were not 'excisable goods.'
- Union of India v. DSCL Sugar Ltd (2015), where the Supreme Court held that 'bagasse' emerging during sugar production was non-dutiable.
- Hindalco Industries Ltd v. Union of India (2015), where the Bombay High Court, affirmed by the Supreme Court, held that the insertion of the Explanation did not change the requirement of 'manufacture' for dutiability.

The Tribunal concluded that the judicial determinations in the appellant's own disputes for earlier and later periods established that 'waste and scrap' arising during the manufacture of 'insulated electrical wires and cables' are not liable to duties of excise. The insertion of the Explanation did not alter the fundamental step of 'manufacture,' and thus, the impugned orders lacked merit.

Conclusion:
The appeals were allowed, and the impugned orders were set aside, reaffirming that 'waste and scrap' arising during the manufacture of 'insulated electrical wires and cables' are not liable to central excise duty. The Tribunal's decision was pronounced in the open court on 11/06/2024.

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