1995 (11) TMI 216 - AT - Central Excise

Summary

Issues Involved:
1. Excisability of aluminium dross, pot dug out material, and furnace dug out material.
2. Applicability of Notification No. 19/88 and Modvat credit rules.
3. Time-bar on the demand for duty.

Issue-wise Detailed Analysis:

1. Excisability of Aluminium Dross, Pot Dug Out Material, and Furnace Dug Out Material:

The appellants are engaged in the manufacture of aluminium products, during which aluminium dross, pot dug out material, and furnace dug out material arise. The department issued show cause notices proposing recovery of duty and imposition of penalties, contending that these items are excisable under Chapter 26 of the Central Excise Tariff Act, 1985. The appellants argued that these items are not excisable goods and cited various judgments including the Hon'ble Bombay High Court in Indian Aluminium Company Ltd. v. A.K. Bandopadayay and the Hon'ble Supreme Court in Swadeshi Polytex, which held that aluminium dross is not excisable.

The Adjudicating authority held that the items were excisable, categorizing them under Chapter sub-heading 2620.00 of the Tariff as residues of metal or metal compounds. He relied on the HSN Explanatory Notes and distinguished the cited judgments as they were rendered in the context of the old Tariff. The authority confirmed the duty demands and imposed penalties.

Upon appeal, the Tribunal referred to the Supreme Court judgment in Union of India v. Indian Aluminium Co. Ltd., which held that aluminium dross and skimmings are not 'goods' or marketable commodities subject to excise. The Tribunal found strong merit in the appellants' contention that this ratio applies even under the new Tariff, as there is no material change in the definition of manufacture under Section 2(f) of the Central Excises and Salt Act, 1944. The Tribunal concluded that aluminium dross, pot dug out material, and furnace dug out material are not excisable goods and set aside the duty demands and penalties.

2. Applicability of Notification No. 19/88 and Modvat Credit Rules:

The appellants contended that the proviso to Notification No. 19/88 is not applicable to their goods. They relied on the Bombay High Court's judgment in Indian Aluminium Co., which extended the benefit of proforma credit to aluminium contained in aluminium dross. The Tribunal noted that the scheme of Modvat is to provide credit on inputs vis-a-vis the finished excisable goods and does not contemplate use of inputs in the manufacture of waste or refuse. The Tribunal did not delve into the details of Notification No. 19/88 and Modvat rules, as it had already concluded that the disputed items were not liable to excise duty.

3. Time-bar on the Demand for Duty:

The appellants argued that the demand for the period from 25-7-1991 to 31-3-1992 was barred by limitation, as the entire demand was beyond the period of six months. They contended that the department was fully aware of the availment of Modvat by the appellants, and hence the charge of suppression could not be leveled against them. The Tribunal agreed with this contention, holding that the non-declaration of the disputed items as final products did not amount to suppression, and therefore, the extended period of limitation was not applicable. Consequently, the demand for the period in question was held to be time-barred.

Separate Judgment by S.K. Bhatnagar, Vice President:

S.K. Bhatnagar, Vice President, concurred with the findings but provided additional observations. He noted that the definition of manufacture under Section 2(f) had undergone changes and emphasized that the Central Excise Tariff Act, 1985, deems certain items as goods by legal fiction. He observed that ash and residues covered by Chapter Note 3 of Chapter 26 are deemed goods, but no duty is leviable due to Notification No. 19/88. He also highlighted that dross and skimming or ashes, deemed to be goods, cannot be considered as finished products, and hence their non-declaration under Rule 57A does not amount to suppression. He agreed that the demands and penalties should be set aside and the appeals allowed with consequential relief.

Conclusion:

The Tribunal held that aluminium dross, pot dug out material, and furnace dug out material are not excisable goods, set aside the duty demands and penalties, and allowed the appeals with consequential relief. The demand for the period from 25-7-1991 to 31-3-1992 was also held to be time-barred.