2014 (11) TMI 385 - AT - Central Excise

Whether Aluminium Dross and Skimmings or similar Non-ferrous Metal Dross and Skimmings, which arise in the process of manufacture of aluminium/Non (ferrous metal products can be considered as a manufactured goods and hence excisable for the period post 10.5.2008 in view of the Explanation added to Section 2(d) of the Central Excise Act, 1944? - Held that - , the legal position has undergone a change after the decisions were rendered by the High Court and the Supreme Court with regard to aluminium / zinc dross and skimmings. An explanation has been added to section 2(d) to provide for a deeming fiction in respect of goods. Secondly, a specific tariff entry has been created in Heading 262040 for aluminium dross, which was not the position when the issue was examined earlier by the hon ble Apex Court. Therefore, the ratio of these decision cannot be applied to the facts of the case before us. Aluminium dross and skimmings and similar non-ferrous metal dross and skimmings which arise as a by-product in the process of manufacture of aluminium/non-ferrous metal products are manufactured goods and hence excisable w.e.f. 10/05/2008 in view of the explanation added to Section 2(d) of the Central Excise Act, 1944. - Decided against the assessee.

Issues Involved:
1. Whether Aluminium Dross and Skimmings or similar Non-ferrous Metal Dross and Skimmings can be considered as 'manufactured goods' and hence excisable post 10.5.2008.
2. Whether the explanation added to Section 2(d) of the Central Excise Act, 1944, deems such dross and skimmings as marketable and excisable.

Detailed Analysis:

Issue 1: Classification as Manufactured Goods
The core issue was whether Aluminium Dross and Skimmings, which arise as by-products in the manufacturing process of aluminium products, can be considered as 'manufactured goods' post the amendment to Section 2(d) of the Central Excise Act, 1944. The Tribunal noted that the appellant, a manufacturer of aluminium sheets and coils, regularly sells these by-products. The Tribunal examined conflicting views from previous cases:
- Bhushan Steel Ltd. vs. Commissioner of Central Excise: Held that zinc dross is not a manufactured product and hence not liable to excise duty even after the amendment.
- KEC International Ltd. vs. Commissioner of Central Excise: Held that zinc dross is excisable as per the explanation to Section 2(d), which deems it marketable.

Issue 2: Marketability and Excise Duty
The Tribunal considered the appellant's argument that the explanation to Section 2(d) only addresses marketability and does not deem non-manufactured goods as manufactured. The appellant cited several Supreme Court decisions affirming that dross and skimmings are not manufactured goods. However, the Tribunal noted that these decisions predated the 2008 amendment and thus did not consider the effect of the explanation.

The Tribunal also reviewed the Revenue's argument that the explanation created a legal fiction deeming goods capable of being bought and sold as marketable, thus making them excisable. The Tribunal highlighted that aluminium dross and skimmings are regularly bought and sold, indicating marketability. The Customs Tariff, which includes aluminium dross and skimmings, further supports their marketability.

Legal Interpretation and Conclusion
The Tribunal emphasized that the explanation to Section 2(d) was intended to address adverse judicial decisions regarding the marketability of waste products. The Tribunal noted that waste and scrap, including dross and skimmings, are recognized as distinct commodities in the tariff and are subject to tax. The Tribunal concluded that the legislative intent was to tax such by-products, and the explanation to Section 2(d) should be given full effect.

The Tribunal referenced the principle of statutory interpretation, stating that every provision of a statute must be given full effect to achieve the legislative intent. The Tribunal concluded that post the 2008 amendment, aluminium dross and skimmings are excisable as they satisfy the tests of manufacture and marketability.

Final Judgment:
The Tribunal answered the reference in favor of the Revenue, holding that:
- "Aluminium dross and skimmings and similar non-ferrous metal dross and skimmings which arise as a by-product in the process of manufacture of aluminium/non-ferrous metal products are manufactured goods and hence excisable w.e.f. 10/05/2008 in view of the explanation added to Section 2(d) of the Central Excise Act, 1944."

The matter was returned to the referral bench for further necessary action.

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