PETITIONER:
TATA IRON & STEEL CO. LTD.
Vs.
RESPONDENT:
C.C.E.
DATE OF JUDGMENT16/12/1994
BENCH:
SAHAI, R.M. (J)
BENCH:
SAHAI, R.M. (J)
PARIPOORNAN, K.S.(J)
CITATION:
1995 SCC (1) 323 JT 1995 (1) 172
1994 SCALE (5)301
ACT:
HEADNOTE:
JUDGMENT:
The Judgment of the Court was delivered by
R.M. SAHAI, J.- The only dispute that arises for
consideration in these appeals directed against the order of
Central Excise and Gold (Control) Appellate Tribunal is
whether scrap obtained by the appellant in course of
manufacture of iron and steel and steel products was
dutiable under Item 26 or Item 26-AA of the Tariff Schedule.
2.Since facts are not in dispute, and the duty is sought to
be levied on scrap obtained by the appellant in course of
manufacture of iron and steel products and supplied by it to
M/s Tata Yodogawa Ltd. on payment of duty for conversion of
scrap into ingots after re-melting which was actually re-
melted and re-used by the appellant as ingot, it is
appropriate to extract the two entries relating to steel
ingots and iron or steel products:
“26. Steel Ingots including SteelRs 100 per metric
Melting Scrap tonne.
26-AA. Iron or steel products,the Rs Three hundred and
following namely: fifty per metric tonne
+ From the Judgment and Order dated 24/27-2-1986 of the
Central Excise (Customs) and Gold (Control) Appellate
Tribunal, New Delhi in A. No. E.B./SB/T/142/76-B & 1844 of
1985-B
324
(i) Semi-finished steel
including blooms, billets,
slabs, sheet bars, tin bars
and hoe bars.
(ii)–(v) * * *
Item 26 levies duty on raw material. In commercial parlance
steel ingots are used for producing steel products. Raw
melting scrap serves the same purpose. Item 26-AA deals
with iron and steel products. What are those products is
mentioned in clauses (i) to (v) of the item. These appeals
are concerned with the scope of clause (i). It deals with
semi-finished steel. A semi-finished product is one which
requires some further work or treatment to become
serviceable. But it cannot apply to scrap as it is normally
understood as something which is not serviceable. Even the
Tribunal held that scrap produced by appellant “did not
strictly answer to the description but they can resemble or
closely resemble them, qualifying to be called substandard
blooms or slabs or bars or channels”. But a substandard
article is not scrap as understood in commercial parlance or
trade circle. Two reasons have been given by the Tribunal
for including scrap of iron and steel in Item 26-AA one,
price circular issued by Controller of Iron and Steel
classifying scrap into industrial, re-rolling and melting
scrap and fixing different rates for each and other the size
of scrap. The Tribunal held that even though scrap sold by
the appellant to M/s Tata Yodogawa Ltd. was melted to
produce ingots but that was not determinative of its
character as what was melted was not melting scrap because
of its size, therefore, it did not attract levy under Item
26 but under Item 26-AA being something like substandard
goods.
3. When the matter was pending in appeal the Assistant
Collector of Central Excise wrote a letter to the Director
of Inspection (Metallurgical), Jamshedpur, requesting him to
give his views whether the scrap sold by the appellant under
agreement to different parties for manufacturing steel
ingots out of the scrap could be described as re-melting
scrap as the Department on examining the invoices found that
maximum length of such scrap of various products like rails,
billets, plates, lee, channels, angles, beams etc. were only
up to 1.5 metres and such scrap, according to Iron and Steel
Controller’s specification of 1959, could not be classified
as re-melting scrap. This letter was replied by the
Director and it was mentioned that from the letter sent by
the Assistant Collector it appeared that the size and
dimension of the scrap was taken as the sole yardstick for
classification and, “if that be the case then the
classification of scraps solely on the basis of size factor
can hardly be considered a very rational classification”.
The Director further was of the opinion that “the steel
manufacturing operations generate scrap which is in turn re-
used not only in the steel-making process but also in plant
furnaces and cupolas. This scrap is called process scrap or
‘arisings’ of steel mills. Cuttings of rails, billets,
plates, axles, channels etc. supplied to M/s Tata Yodogawa
Ltd. are ‘arisings’ of TISCO’s mills. These scraps (process
scrap) are usually treated as melting scraps in developed
countries as well as in
325
India. There are different grades of melting scrap heavy,
medium and light”. He further observed that the technology
has changed and in view of the developments in iron and
steel industry the size factor could not always be main
criterion for the classification of steel scraps.
4. Although this letter is not relevant but it goes to
demonstrate that size of the scrap is not determinative
whether it was melting scrap or not. ‘Scrap’ according to
dictionary means “a small piece cut or broken from
something; fragment”. In commercial parlance ‘scrap’ is
normally understood as ‘waste’. But it may be used for re-
rolling or re-melting for bringing out raw material to be
used for producing finished products. Under Entry 26-AA
what is exigible to duty is semi-finished steel including
blooms, billets, slabs, sheet bars etc. Semi-finished may
mean between raw material and finished products. But it
cannot be described as scrap. A substandard bloom or billet
is steel bloom or billet. But the scrap of billet or bloom
would not be the same thing as semi-finished product. In
the commercial sense, scrap and semi-finished products
cannot be understood in the same sense. The attempt of the
Department, therefore, to levy duty on scrap under Item 26-
AA was not correct.
5. Melting scrap is defined as:
“Scrap which cannot be used for any other
purposes but can be charged into furnace for
melting should be classified as melting
scrap.”
The Tribunal held that since the appellant did not dispute
that the scrap produced by the appellant could be industrial
scrap, the scrap produced by it could not be taken to be re-
melting scrap. Item 26 purports to levy duty on re-melting
scrap. The Tribunal having found that the scrap produced by
the appellant was remelted the products cleared by the
appellant satisfied the test of being re-melting scrap.
6. Neither reason given by the Tribunal, therefore,
appears to be sound. Price fixation by Controller of Iron
and Steel could not furnish basis for interpreting the
entry, for levying duty under the Central Excises and Salt
Act, 1944. The Controller might have classified scrap
depending on size and terming it as rolling, melting and
industrial scrap but that could not render it as semi-
finished steel products. Size of scrap may be relevant for
fixation of price but it could not reflect on the nature of
scrap.
7. In the result, the appeals are allowed and the order
passed by the Tribunal is set aside. The question of law
raised by the appellant is decided by saying that the scrap
cleared by the appellant in each year having been melted and
re-used as iron ingot was re-melting scrap dutiable under
Item 26 of the Tariff Schedule.
8. The appellant shall be entitled to its costs.
327