1. Question for decision in this appeal originally filed as a Revision application to the Government of India is whether "Mill-Scale"723400 M.T. which arose out of scraping of Steel during hot rolling process during the period 1-3-1975 to 9-10-1976 should have been classified under T.I. 68 of C.E.T. and whether the demand of duty of Rs. 191.03 from the appellants and penalty of Rs. 5/- imposed against them is justified.
2. The appellants are engaged in the manufacture of Iron and Steel products falling under T.I. 26AA of the C.E.T. and have been manufacturing 'Mild Steel Bars/Rods' out of duty paid Billets in their factory. Sometime in 1976, Excise Officer checked the appellants' record and asked the appellants for particulars of sale of Mill-Scales which arose out of removal of surface scales of the metal during hot rolling process in the appellants' factory. After the appellants furnished the necessary particulars, show cause notice was served on the appellants why they should not be called upon to pay duty on the quantity and for the period stated in para-1 above. The appellants showed cause to the Assistant Collr. of Central Excise, Calcutta, who by his order dated 23-2-1977 held that Mill-Scale is Iron Oxide falling under T.I. 68 and the demand of duty was confirmed and a token of penalty amounting to Rs. 5/- was imposed against the appellant. The order was upheld in appeal by the Appellate Collector of Central Excise, Calcutta by his order dated 29-4-1978. Hence the present appeal.
3. At the bearing of the appeal, Sh. N.K. Mitra Majumdar, Consultant for the appellants besides, reiterating the grounds set cut in the Memo, of Revision also urged that a copy of the Chemical Examiner's report had not been supplied to the appellants. In the grounds of revision (Appeal), it is mainly urged that Surface Scales fall off the heated metal and are commonly known as Mill-scales. There is no manufacturing process. The Mill Scale are portions of the duty paid Mild Steel Billets/blooms and Central Excise duty under T.I. 26AA(1) has already been paid on them. The product is only scrap and cannot be classified as goods not elsewhere specified under T.I. 68. The Mill scales are exported to foreign countries through the Metal Scrap Trading Corporation, a Government of India Undertaking which implies that the Mill-scales are metal scraps.
4. Sh. K.V. Kunhikrishnan, J.D.R. appearing for the respondent while defending the orders passed by the lower authorities could not controvert Sh. Majumdar's contention that copy of the Chemical Examiner's report had not been supplied to the appellants.
5. We have carefully considered the arguments advanced by both the parties. Apart from Sh. Majumdar's contention regarding copy of the Chemical Examiner's report having not been supplied to the appellants and the same not being controverted by the respondent's representative, we find nothing in the orders of the lower authorities to show that copy of the same was supplied to the appellants. The finding on the basis of chemical Examiner's report that Mill-scales is Iron Oxide would have, therefore, be excluded. Mill-scales arose during process of manufacture of Iron & Steel Products. The material on the record shows that it is exported through Metal Scrap Trading Corporation, a Govt. of India Undertaking. From this, it would be reasonable to infer that Mill-scales are nothing but iron or steel scrap. Besides, all this, during arguments, Sh. Majumdar also placed a cutting from the daily Statesman Calcutta dated 23-3-1979, from which it appears that Government decided to import Mill scale treating the same as scrap.
This would lend further support to the appellants' argument.
6. In view of the foregoing, the Bench feels that lower authorities were not justified in classifying Mill-scale as Iron Oxide falling under T.I. 68 of the C.E.T. The orders passed by the lower authorities are set aside with consequential refund to the appellants. The appeal is thus allowed.