Full Judgment Text
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CASE NO.:
Appeal (civil) 524-525 of 1998
PETITIONER:
Collector of Central Excise, Patna
RESPONDENT:
M/s Tata Iron & Steel Company Ltd.
DATE OF JUDGMENT: 26/02/2004
BENCH:
S. Rajendra Babu, Dr. AR. Lakshmanan & G.P. Mathur.
JUDGMENT:
J U D G M E N T
WITH
Civil Appeal Nos. 5664 of 2002 and 5262 of 2003
Dr. AR. Lakshmanan, J.
In these appeals, we are concerned with the question of levy of excise duty on
zinc dross and flux skimming arising during galvanisation of steel sheets.
BRIEF FACTS OF THE CASE:
During galvanisation of steel sheets, zinc dross and flux skimming arises which
the respondent/assessee has declared as by- product in their product manual published
by the Marketing Division for information of customers. It has been alleged that zinc
dross and flux skimming are being sold by the assessee to various customers without
making any declaration in the classification list, without paying any duty on clearance of
the above product and without maintaining any records prescribed under the Central
Excise Rules, 1944 besides showing them as non-excisable in their Despatch Advices.
According to the Department, the assessees have cleared the goods without payment
of duty and thus evaded duty in contravention of the Central Excise Rules, 1944 and in
doing so they did not obtain Central Excise licence for manufacture of zinc dross and
flux skimming as required under Rule 174 of the Central Excise Rules, 1944 inasmuch
as they have suppressed the production and removal of the said goods with intent to
evade payment of duty.
CASE FOR THE DEPARTMENT:
A show cause notice was issued to the assessee to show cause why a penalty
should not be imposed on them under the provisions of the Central Excise Rules, 1944
and why the duty be not demanded under Rule 9 (2) of the Central Excise Rules, 1944.
CASE FOR THE PARTY:
In response to the show cause notice, the assessee made a written defence
denying all the allegations of contravention of various Central Excise Rules and stated
that flux skimming is a material held as non-excisable by the CEGAT. In support of
their contention, they have cited various judgments and, in particular, the case of Indian
Aluminium Co. Ltd. vs. A.K. Bandyopadhyay [1980(6) E.L.T. 146 (Bom.)] stating
further that dross and skimming are neither goods nor end products nor finished goods
attracting duty under item 25 of the Central Excise Tariff. As regards zinc dross, they
have claimed to clear the item as non-excisable as per the decision of the Bombay High
Court.
It is the contention of the assessee that they do not manufacture zinc and article
thereof but they do galvanise sheets falling under Chapter 72. Since zinc dross and
flux skimming have already been held to be non-excisable item, the issue of gate
passes for removal of products and submission of quarterly returns etc. and filing
classification list does not arise. All the assesses have denied violation of the Central
Excise Rules, 1944. They have further stated that they submitted classification list and
are in the bona fide impression that the goods are non-excisable and are not
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manufactured by them and, therefore, the question of imposing penalty under any rule
is out of question.
In Civil Appeal Nos. 524 and 525 of 1998, the Collector of Central Excise, Patna
ordered for confiscation of the zinc dross. However, the Collector gave the
manufacturers the option to redeem the goods on payment of redemption fine. A
penalty was also imposed on the manufacturer. The assesses preferred an appeal to
the CEGAT, New Delhi which set aside the order of the Collector, Central Excise relying
upon the decision of this Court in the case of Union of India vs. Indian Aluminium Co.
Ltd. [1995 (77) E.L.T. 268 (S.C.)]. Aggrieved by the said decision, the Commissioner of
Central Excise, Patna preferred the above two appeals.
In Civil Appeal No. 5262 of 2003 \026 M/s National Steel Industries Limited now
known as M/s National Steel and Agro Industries Limited filed declaration classifying
the zinc dross under Heading 7902.00 of the Schedule to the Central Excise Tariff Act,
1985. According to the assessee, they filed declaration claiming the zinc dross as non-
excisable commodity and continued to clear zinc dross without payment of duty up to
December, 1997. Later, they paid duty under protest. A show cause notice was issued
as to why zinc dross should not be classified under Heading 7902.00 and why excise
duty should not be recovered. The Deputy Commissioner of Central Excise held the
goods classifiable under Heading 7902 of the Central Excise Tariff Act, 1985 and
confirmed the payment of penalty which was imposed. The Commissioner (Appeals)
rejected the appeal filed by the assessee. The Tribunal, on appeal by the assessee,
set aside the order in appeal holding that zinc dross and flux skimming are not
excisable goods following the decision of this Court in Indian Aluminium Co. Ltd.
(supra). The Tribunal further relied on the decision in the case of Tata Iron and Steel
Company Limited vs. CCE, Patna [2001 (135) E.L.T. 1142] and Siddarth Tubes
Limited vs. CCE, Indore dated 08.04.2002 which referred to the judgment in the case
of Indian Aluminium Co. Ltd. (supra). Before the Tribunal, it was submitted by the
Department that zinc dross is a distinct commercial commodity and hence liable to
excise duty.
Civil Appeal No. 5664 of 2002 also arises out of similar circumstances. In this
appeal, according to the assessee, zinc dross and zinc scalling does not constitute to
be excisable goods as defined in Section 2(d) of the Central Excise Salt Act, 1944 and,
therefore, they filed refund claims for amount of duty paid on zinc scalling.
According to the Department, prior to 01.03.1988 as per Chapter Note 3 of
Chapter 26 ash and residue other than dross and ash of zinc containing metals or
metallic compounds applies only to the ash and residue of a kind used in industry either
for the extraction of metals or as a basis for the manufacture of chemical compound of
metal. This chapter note was subsequently amended w.e.f. 01.03.1988 by omitting the
words "other than dross and ash of zinc containing metals of metallic compounds".
Thus, prior to 01.03.1988 the said dross and ash of zinc containing metals or metallic
compound were classifiable under 7902 and subsequent to 01.03.1988 the said product
got classified under sub- heading 26.20.
Here also a show cause notice was issued and the Assistant Commissioner
rejected the refund claim holding that the ash cleared by the noticee (assessee)
contains metals and oxide of zinc and the same is also used for the extraction of metal
as a basis for the manufacture of chemical compounds of metal and they are
marketable and also answer of the description of chapter heading. Therefore, they
contended that the same is correctly classifiable under Chapter heading No. 26.20 of
the Central Excise Tariff Act, 1985. The assessee’s appeal before the Commissioner
was also rejected and the further appeal by the assessee before the CEGAT was
allowed relying on the judgment of this Court in Indian Aluiminium Co. Ltd. (supra).
The Tribunal, following the judgment of this Court, categorically held that zinc dross and
zinc scalling are not goods, hence not excisable.
We have perused the relevant records and the rules i.e. the Central Excise
Rules and of the orders passed by the respective authorities and of the CEGAT and
heard the arguments of Mr. A.K. Ganguli and Mr. J. Vellapally - learned senior counsel
appearing for the respective parties. Mr. Rajesh Kumar and Mr. Alok Yadav, learned
counsel in other appeals adopted the arguments of learned senior counsel.
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Mr. Ganguli, learned senior counsel, appearing on behalf of the appellant
submitted that sub-heading 7902.00 of the Central Excise Tariff includes waste and
scrap of zinc and waste and scrap of zinc include dross and ash. According to Mr.
Ganguli, the case of Indian Aluminium Co. Ltd. (supra) relates to aluminium dross
and skimming and the definition of aluminium waste and scrap does not include dross
and skimming and, therefore, zinc dross and skimming are covered under sub-heading
No. 7902.00 of the Central Excise Tariff Act, 1985. He, therefore, prays that the
appeals filed by the appellant be allowed. He would further submit that prior to
01.03.1988, as per Chapter Note 3 of Chapter 26 ash and residue other than dross and
ash of zinc containing metals or metallic compounds applies only to the ash and residue
of a kind used in industry either for the extraction of metals or as a basis for the
manufacture of chemical compound of metal. This chapter note was subsequently
amended w.e.f. 01.03.1988 by omitting the words "other than dross and ash of zinc
containing metals of metallic compounds". Thus he submits that prior to 01.03.1988,
the said dross and ash of zinc containing metals or metallic compound were classifiable
under 7902 and subsequent to 01.03.1988 the said product got classified under sub-
heading 26.20. It was contended that a close reading of the above chapter note reveals
that the heading 26.20 covers ash and residue which contain metal or metallic
compounds and which are of kind used in industry either for the extraction of metal or
metallic compound or as basis for the manufacture of chemical compound of metals.
Countering the argument, Mr. J. Vellapally, learned senior counsel for the
respondent, submitted that zinc dross and flux skimming were waste products in the
process of galvanisation of steel sheets and are not goods under the Central Excise
Act, 1944 and that the process of galvanisation merely involves the steel sheets
through a batch of molten zinc whereby the said sheets acquire a coat of zinc on the
surface resulting in galvanisation and that zinc dross is merely the impurity which arises
as a result of the process of galvanisation and settle to the bottom. During the same
galvanisation process, ammonium chloride is used as a flux for cleaning the impurities
from the sheets. This ammonium chloride when mixed with molten zinc also creates
some impurities in the form of flux which floats to the surface. This flux is periodically
skimmed off the surface of the zinc and these are known as ’flux skimming’. Learned
counsel would further submit that zinc dross and flux skimming are nothing but refuse
products and these are not marketable. Learned counsel relied on the decision of this
Court being Indian Aluminium Co. Ltd. (supra) and submitted that this Court held that
aluminium dross and skimming are neither goods nor marketable commodity and,
therefore, not liable to excise duty and he, therefore, prays that the appeals filed by the
appellant be dismissed.
On the above pleadings and of the arguments, the following questions of law
may arise for determination of this Court.
The issue which arises for consideration is that whether zinc dross and flux
skimming arising during galvanisation of steel sheets are goods within the meaning of
the Central Excise Act, 1944 and are liable to central excise duty as classified by the
Revenue
OR
Whether zinc dross and flux skimming are waste products in the process of
galvanisation of steel sheets and are not goods under the Central Excise Act, 1944 as
claimed by the assessee.
In this case, the respondents are engaged in the manufacture of steel sheets
and are also galvanising steel sheets. During the process of galvanisation, zinc dross
and flux skimming come into existence. The contention of the assessee is that these
flux and zinc dross are the waste and are not marketable. The High Court of Bombay in
the case of Indian Aluminium Co. Ltd. (supra) held that dross and skimming are
neither goods nor en-products. As seen earlier, dross is nothing but scum thrown off
from metals in something; refuse and rubbish or worthless impure metal and skimming
is that which is removed or obtained from the surface by skimming. These are, in our
opinion, nothing but ashes resulting in the process of manufacture of aluminium sheets
from aluminium ingots. In Union of India vs. Delhi Cloth and General Mills Co. Ltd.
[AIR 1963 SC 791] it was held that "goods" must be something which can ordinarily
come to the market and be brought and sold and that the "manufacture" which is liable
to excise duty under the Central Excise and Salt Act, 1944 must, therefore, be the
"bringing into existence of a new substance known to the market".
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The passage runs thus :-
"Manufacture" implies a change but every change is not manufacture and yet
every change of an article is the result of treatment, labour and manipulation.
But something more is necessary and there must be transformation; a new and
different article must emerge having a distinctive name, character of use."
We are of the opinion that the dross and skimming are merely the refuse, scum
or rubbish through out in the process of manufacture of aluminium sheets and,
therefore, cannot be said the result of treatment, labour or manipulation whereby a new
and different article emerges with a distinctive name, character or use which can
ordinarily come to the market to be brought and sold. Merely because such refuse or
scum may fetch some price in the market does not justify it being called a by-product,
much less an end product or a finished product.
This view of the High Court of Bombay was upheld by this Court in Indian
Aluminium Co. Ltd. (supra). This Court held as under:
" It is also not possible to accept the contention of the
appellants that aluminium dross and skimmings are "goods" or
marketable commodity which can be subjected to the levy of excise.
Undoubtedly, aluminium dross and skimmings do arise during the
process of manufacture. But these are nothing but waste or rubbish
which is thrown up in the course of manufacture. The term "dross" is
defined in The New Shorter Oxford Dictionary as:
Dross:
"Dregs\005(1) Impurities separated from metal by melting the
scum which forms on the surface of molten metal\005\005(2) Foreign
matter mixed with anything\005..(3) Refuse, rubbish, worthless matter
especially as contrasted with or separated from something of value."
The ASM Metals Reference Book (2nd Edition, 1983) produced by the
American Society for Metals defines "dross" as follows:
"The scum that forms on the surface of molten metals largely
because of oxidation but sometimes because of the rising of impurities
to the surface."
Mcgraw Hill Dictionary of Science and Engineering (1984 Edition) defines it as:
"An impurity, usually an oxide, formed on the surface of molten metal."
Dross and skimmings may contain some small percentage of
metal. But dross and skimmings are not metal in the same class as
waste or scrap. It may be possible to recover some metal from such
dross and skimmings. They can, therefore, be sold. But this does not
make them a marketable commodity. As learned Single Judge of the
Bombay High Court has pointed out, even rubbish can be sold.
Everything, however which is sold is not necessarily a marketable
commodity as known to commerce and which, it may be worthwhile to
trade in. Learned Single Judge of the Bombay High Court, therefore,
rightly came to the conclusion that the proviso to Rule 56A was not
applicable as aluminium dross and skimmings are not excisable goods.
The entire quantity of raw material, namely duty-paid
aluminium ingots procured by the assesses from outside was used in
the manufacture of aluminium sheets. It is nobody’s case that the
aluminium sheets which were manufactured by the assesses could
have been manufactured out of a lesser quantity of aluminium ingots
than what was actually used. In the process of manufacture, dross
and skimmings had to be removed in order that aluminium sheets of
the requisite quality could be manufactured. This does not mean that
the entire quantity of aluminium ingots was not used for the
manufacture of aluminium sheets. In the course of manufacture, a
certain quantity of raw material may be lost because of the very nature
of the process of manufacture or some small quantity of raw material
may form part of wastage or ashes. This does not mean that the
entire raw material was not used in the manufacture of finished
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excisable products. An exact mathematical equation between the
quantity of raw material purchased and the raw material found in the
finished product is not possible, and should not be looked for.
Under Tariff Item 27 "Waste and Scrap of Aluminium" is one of the items
exigible to excise duty. An explanation was added to Tariff Item 27 by the
Finance Act, 1981 to the following effect:
"27. Explanation \026 (1) ‘Waste and Scrap ’ means waste and scrap
metal fit only for the recovery of metal by remelting or for use in
the manufacture of chemicals, but does not include sludge, dross,
scalings, skimmings, ash and other residues;"
Tariff Item 68 which was introduced for the first time in 1975 was as follows:
"68. All other goods, not elsewhere specified, but excluding-
(a) *
(b) *
(c) *
Explanation \026 For the purposes of this Item, goods which are
referred to in any preceding Item in this Schedule for the purpose
of excluding such goods from the description of goods in that item
(whether such exclusion is by means of an Explanation to such
Item or by words of exclusion in the description itself or in any
other manner) shall be deemed to be goods not specified in that
Item."
The question in all these appeals relates to the exigibility of aluminium
dross and skimmings to excise duty by reason of Item 68 and its
Explanation read with the Explanation to Item 27. It is contended by
the appellants that the Explanation to Item 27 makes it clear that dross
and skimmings are not included in the item "Waste and Scrap of
Aluminium". Since these are expressly excluded from Item 27, these
must be included in Item 68 as the Explanation to Item 68 makes it
clear that goods which are referred to in any preceding Item in the
Schedule for the purpose of excluding them from the description of
goods in that Item, will have to be included in Item 68.
The entire argument proceeds on the basis that aluminium dross and
skimmings are excisable goods. Otherwise the question of their
inclusion in Tariff Item 68 does not arise. The appellants have
emphasized the fact that aluminium dross and skimmings are capable
of being sold. Hence they must be considered as marketable goods.
Since they arise in the course of manufacture, the duty of excise can
be levied on such goods. The foundation of the arguments rests on
the assumption that aluminium dross and skimmings are marketable
goods. For reasons which we have set out earlier, it is not possible to
consider aluminium dross and skimmings as "goods" or as a
commercial and marketable commodity. Dross and skimmings are
merely refuse or ashes given out in the course of manufacture, in the
process of removing impurities from the raw material. This refuse is
quite different from waste and scrap which is prime metal in its own
right.
The Explanation to Item 27 is not for the purpose of separating
certain types of wastes and scrap from the main Item of "Waste and
Scrap of aluminium" and thus making it exigible to tax under Item 68.
The Explanation to Item 27 merely excludes from waste and scrap
certain residues or rubbish which cannot be categorised as "goods" at
all. It is only those goods, which are otherwise liable to be included in
a given Tariff Item, but are expressly excluded from it, which fall under
the residuary Tariff Item 68. The Customs, Excise and Gold (Control)
Appellate Tribunal in its order, which is the subject-matter of Civil
Appeal No. 1423/87, has given several examples of this kind of
exclusion which is covered by the Explanation to Tariff Item 68. It has
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given the illustration of a motor specially designed for use in a
gramophone or record player which is expressly excluded from Tariff
Item 30 which covers electric motors. These excluded motors are also
motors, but because of some peculiar characteristics imparted to them
in their manufacture, they are excluded for assessment under Tariff
Item 30. Similarly, slotted angles and channels made of steel which
can be used as part of steel furniture, are expressly excluded from
Tariff Item 40 which covers steel furniture and parts. These exclusions
are for the purpose of correct assessment of these excisable products.
These excluded articles are "goods" in their own right, and are openly
bought and sold in the market. Such excluded items, if they are not
covered by any other item, would fall in the residuary Item 68 by virtue
of the Explanation to Tariff Item 68.
In Collector of Central Excise, Patna vs. Indian Tube Co. Ltd. [1995 (77)
E.L.T. 21 (S.C.)], this Court has approved the reasoning of the Tribunal that the diluted
sulphuric acid, i.e., liquid which remains after user, cannot be said to be a manufactured
product and hence not liable to duty and that waste pickle liquor is in the nature of
waste product and has neither marketability nor saleability and, therefore, not liable to
duty.
In Commr. Of C.Ex., Chandigarh-I vs. Markfed Vanaspati & Allied Indus.
[2003 (153) E.L.T. 491 (S.C.)], the question for consideration in this case was whether
"spent earth" is liable to excise duty or not. Under the Tariff, prior to its amendment in
1985, it had been consistently held that "spent earth" was not liable to duty. However,
with the enforcement of new Tariff in 1985, a conflict arose between various benches of
the Tribunal. Some benches held that "spent earth" was still not excisable, whereas
other benches held that, as it now stood included by a specific sub-heading, it became
excisable. In view of these conflicting decisions, the matter was placed before the
Larger Bench of the CEGAT which held that "spent earth" was still not dutiable. In the
appeal preferred before this Court, this Court held the burden to prove that there is
manufacture and that what is manufactured is on the Revenue and that merely because
an item falls in a Tariff entry, manufacture must not be deemed. In para 6, this Court
held as under:
"6. However, it appears to us that the observation made in this authority are "per
incuram". In so observing, the decision of a Larger Bench of this Court in the
case of Collector of Central Excise, Indore v. Universal Cable Ltd. Reported in [
1995 Supp (2) SCC 465], has not been noted or considered. In this case an
argument that a good become excisable because it is covered by Tariff Entry,
has been negatived. In the case of B.P.L. Pharmaceuticals Ltd. v. Collector of
Central Excise reported in [ 1995 Supp (3) SCC 1] it has also been held that
merely because there is a change in the Tariff Item the goods does not become
excisable. Subsequently in a judgment dated 13th February, 2003 in Civil
Appeal No. 6745 of 1999 it has been held that merely because an item falls in a
Tariff Entry, it does not become excisable unless there is manufacture and the
goods is marketable. In Lal Woollen & Silk Mills’ case (supra) it has not been
held that the twin test of manufacture and marketability is not to apply. It is not
possible to accept the contention that merely because an item falls in a Tariff
Entry it must be deemed that there is manufacture. The law still remains that
the burden to prove that there is manufacture and that what is manufactured is
on the revenue. In this case, no new evidence is placed to show that there is
manufacture. "Spent earth" was "earth" on which duty has been paid. It
remains earth even after the processing. Thus if duty was to be levied on it
again, it would amount to levying double duty on the same product."
In Union of India vs. Ahmedabad Electricity Co. Ltd. [2003 (158) E.L.T. 3
(S.C.)], the question which arose for consideration was regarding exigibilty of ’cinder’ to
excise duty. The respondent in the said appeals use coal as fuel for producing steam
to run the machines used in their factories to manufacture the end product. Coal is
burnt in the boilers or furnaces for producing steam. Normally, coal when it is burnt in
boilers is reduced to ash. Some part of coal does not get fully burnt because of its low
combustible quality. This unburnt or half burnt operation of coal is left out in the boiler
s.
It is called ’cinder’. A point was posed for determination by this Court in para 7 of this
judgment which is quoted hereinbelow.
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"7. Whether inclusion of an item in the entries to the First Schedule to the Tariff
Act per se makes the item exigible to excise duty ?
It is useful to reproduce the relevant paragraphs of the judgment which read as
under:
"We are unable to accept the proposition advanced by the
learned Additional Solicitor General. A close look at Section 3 of the
Central Excise Act shows that the words ‘excisable goods’ have been
qualified by the words "which are produced or manufactured in India".
Therefore, simply because goods find mention in one of the entries of
the First Schedule does not mean that they become liable for payment
of excise duty. Goods have to satisfy the test of being produced or
manufactured in India. It is settled law that excise duty is a duty levied
on manufacture of goods. Unless goods are manufactured in India,
they cannot be subject to payment of excise duty. There is no merit in
the argument that simply because a particular item is mentioned in the
First Schedule, it becomes exigible to excise duty. [See Hyderabad
Industries Ltd. & Anr. Vs. Union of India & Ors., (1995) 5 SCC 338
and Moti Laminates Pvt. Ltd. & Ors. Vs. Collector of Central
Excise, Ahmedabad, (1995) 3 SCC 23]. Therefore both on authority
and on principle, for being exigible to excise duty, excisable goods
must satisfy the test of being produced or manufactured in India. The
arguments to the contrary is rejected.
Recently this Court had occasion to deal with a case of excise
duty sought to be levied on ‘spent earth’. This was in Commissioner
of Central Excise, Chandigarh vs. Markfed Vanaspati & Allied
Industries [2003 (153) E.L.T. 491]. Excise duty was being paid on
"earth", ‘spent earth’ is a residue resulting from treatment of fatty
substances. The ‘spent earth’ remained ‘earth’ even after processing
though its capacity to absorb was reduced. It was held that no excise
duty was leviable on ‘spent earth’. The facts in this case are quite
similar to the facts of the case in hand. In Markfed case ‘earth’ was
reduced to ‘spent earth’ with a reduced potency to absorb. In the case
in hand, coal was reduced to inferior quality coal which was no longer
of use in the furnaces in the factories, therefore, it could be
reasonably be said that ‘cinder’ i.e. coal of reduced quality still was
coal and not exigible to excise duty.
In Modi Rubber Ltd., Modi Nagar, U.P. & Anr. Vs. Union of
India & Ors. [1987 (29) E.L.T. 502 (Del.)] it was held that waste/scrap
obtained not by any process of manufacture but in the course of
manufacturing the end product was not exigible to excise duty. This
was a case of manufacture of tyres, tubes etc. In the course of
manufacturing process to produce the end product i.e. tyres, tubes,
flaps etc. waste was obtained in the shape of cuttings. It was held that
this was not exigible to tax even though the waste may have some
saleable value. The essential reason for this was that there was no
transformation in the case of waste/scrap to a new and different article.
No new substance having a distinct name, character and use was
brought about. Manufacturing process involved treatment, labour or
manipulation by the manufacturer resulting in a new and different
article. It requires a deliberate skilful manipulation of the inputs or the
raw materials. This was not so in case of scrap.
It is worth mentioning that in UOI & Ors. Vs. Indian
Aluminium Co. Ltd. & Anr. [1995 Suppl;(2) SCC 465], it was held
that waste or rubbish which is thrown up in the course of manufacture
could not be said to be a produce of manufacture exigible to excise
duty. In this case the assesses manufactured aluminium products out
of the aluminium ingots. In the process of manufacture dross and
skimmings arise and accumulate in the furnace in the shape of ashes
as a result of oxidization of metal. Aluminium dross contain an amount
of metal from which they come but they lack not only metal body but
also metal strength, formability and character. Such dross and
skimmings are distinct from scrap which is a metal of good quality.
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Dross and skimmings though obtained during process of manufacture
were held to be not exigible to excise duty at the relevant time. Since
the dross and skimmings were sold in the market it was argued that
they were a marketable commodity and should be subject to levy of
excise duty. The Court observed that these were nothing but waste or
rubbish which is thrown up in the course of manufacture. This
judgment also answers the argument of the learned counsel for the
appellant based on Khandelwal Metal’s case[(1985) 3 SCC 620]
wherein brass scrap produced during manufacturing of brass goods
were considered to be liable to excise. In the present case, cinder
though sold for small price cannot be said to be a marketable
commodity in the sense the word " marketable" is understood. Due to
sheer necessity cinder has to be removed from the place where it
occurs because unless removed it will keep on accumulating which in
turn lead to loss of precious space. Facts noted in TISCO’s case by
the lower authorities show that TISCO had been paying substantial
amounts for removing cinder to a dumping ground. From the dumping
ground, it was picked up by parties to whom it was sold. As per the
averment, TISCO is spending many times more on removing cinder
than what it realizes from its sale. These are matters of fact which
have not been gone into by the authorities concerned and therefore it
is too late for us to go into all this.
Applying the tests laid down in these judgment, it is not
possible to say that cinder satisfied the requirement of being
manufactured in India."
This Court, in conclusion, held that the onus to show that particular goods on
which excise duty is sought to be levied have gone through the process of manufacture
in India is on the Revenue and that the Revenue have done nothing to discharge this
onus.
In our opinion, this Court in Indian Aluminium Co. Ltd. (supra) has held that
merely selling does not mean dross and skimming are marketable commodity as even
rubbish can be sold and everything, however, which is sold is not necessarily a
marketable commodity as known to commerce and which, it may be worthwhile to trade
in. The issue involved in this case is governed by the past decisions of the Tribunal and
also of this Court where the Tribunal and this Court held that the zinc dross and
skimming arising as refuse during galvanisation process are not excisable goods. The
Tribunal, in our opinion, has rightly relied upon the decision of this Court in Indian
Aluminium Co. Ltd. (supra) and in view of the above decision of the Tribunal following
this Court’s opinion in Indian Aluninium Company Limited (supra), we disagree with
the appellant’s that zinc dross, flux skimming and zinc scallings are goods and hence
excisable.
The appeals filed by the Revenue have no merits and are liable to be dismissed
and we do so accordingly. The respondent/assessee will be entitled for refund of the
duty and penalty, if any, paid by them. No costs.