1. This is an appeal filed against the order of the Collector of Central Excise (Appeals). Bombay, dated 8.3.1983 confirming the orders of the Assistant Collector, Bombay, dated 20.4.1982. the appellants are carrying on business of manufacturing, amongst others, copper wire bars, strips, rods, flats and bus bars. They have been manufacturing these items ever since 1979. For the purpose of their manufacture, the appellants allege that they have been importing the scrap as well as utilizing the scrap purchased from the local market. The appellants filed their classification lists in respect of those consignments on 25.9.1979 showing copper and copper alloy, flats and bars as goods falling under Tariff Item 26A. They claimed exemption from payment of duty under Notification 119/66 dated 16.7.1966. Of the three units, M/s. Shakti Metal Industries and M/s. Steel Appliances Industries are not manufacturing any other excisable goods. The third unit, M/s.
Alloys Casting Works Manufacturing Company, is manufacturing other excisable goods as well. The classification lists filed by M/s. Alloy Casting Works Manufacturing Company were duly approved by the Assistant Collector. On 10.4.1980, the appellants received a show cause notice, demanding from them excise duty amounting to Rs. 2,02,400.42 on copper wire bars and copper rods, manufactured and cleared by them from November 1979 to March 1980, on the ground that the excise duty was short-levied and that the Notification 119/66 did not apply to goods manufactured out of imported copper scrap. The appellants submit that there was no show cause notice in respect of the other unit producing similar goods and by similar process. According to the appellants, Clause (i) of the Notification did not make any distinction between old scrap, whether imported or indigenous. The appellants have been using imported old scrap, i.e. imported old copper tubes, burnt wires and radiators, etc. They also contended that large quantity of copper scrap imported under open general licence are being sold in the local market.
The appellants submitted a fresh classification list on 22 6 1980 which was approved. The Department has been issuing fresh show cause notices without any basis. The products manufactured by the appellants were out of imported scrap. Further, zinc was added to the goods at the time of the manufacture The appellants also stated that barring the use of imported copper in April '81, May '81, June '81 and September '81, all the copper scrap used for the manufacture was either locally purchased or scrap imported by them prior to 1.3, iv81. The appellants claim that Clause (i) of the Notification would apply to the products manufactured by them. Prior to 1.3.81, there was no excise duty on copper scrap and as such no Countervailing Duty could be recovered. The appellants have not imported any scrap after 1.3.1981 and the CVD, if any, was payable by M/s, Nitual Corporation, M/s. Ranchoddas Purushottam and M/s.
Precious Industries. The appellants urge that there were several other manufacturing units producing goods by the same process and these appellants have been singled out for discriminatory treatment.
2. The learned Counsel for the appellants reiterated the contentions raised in the grounds of appeal and urged that inter-departmental correspondence also supported the contentions of the appellants. The appellants have filed Annexure 'A' showing the imported copper scrap consumed in the manufacture of copper wire bars for the period October '79 to September '81. They filed the copy of the letter C. No.2311/5/65 dated the 11th April, 1966 by the Director of Inspection.
Customs and Central Excise, Delhi, addressed to the Collector of Central Excise, Bombay, to the effect that indigenous and imported scrap could be treated at par in the matter of assessment of crudes of manufactures produced therefrom. To a similar effect is the letter dated 8.3.1977 of the Assistant Collector of Central Excise, Bombay.
1. Copper and Copper alloys in any crude form including Effective ingots, bars, blocks, slabs, billets, shots and pellets, falling rates under sub item No. (1) and wirebars, wire rods and castings Nil of Copper alloys falling under sub-item (1a) if made from any of the following materials or a combination thereof, namely: (ii) Scrap obtained from copper or copper alloys where the prescribed amount of duty of excise or countervailing Customs duty, has been paid, on the copper or the copper content of alloys; or (iii) Virgin copper in any crude form on which the prescribed amount of duty of excise or countervailing Customs duty has already been paid; (iv) Copper or copper alloys in any crude form purchased from the market on or after 20.8.1966.
Notification No. 119/66-C.E. dated 16.7.1966 and No, 17/69-C.E. dated 1.3.1969.
Under the Notification 119/66 dated 16 7.1966, for the words "copper or copper alloys" the word "copper" was substituted There was a further amendment under Notification 32/81 dated 1.3.81 and Clause (v) was added as follows: (v) Waste or scrap of copper and copper alloys, falling under sub-item (1b) of the said Item No. 26A, in respect of which the appropriate amount of duty of excise, or, as the case may be, of the additional duty leviable under Section 3 of the Customs Tariff Act, 1975 (51 of 1975), has already been paid on the copper or the copper content of the alloys.
4. Shri Lakshmikumaran, the learned SDR, contended that Clause (ii) envisaged the exemption of products manufactured out of waste or scrap obtained from copper and copper alloys where duty had been paid on the copper or copper content of the alloys In this case he pointed out that Clause (ii) will not apply since the scrap imported by the appellants could not have been obtained from duty-paid copper or copper alloys. In respect of Clause (i) he urged that there must be proof that the scrap was old scrap of copper' He made pointed reference to the Bills of Entry and the Invoices to make out that they do not specify the nature of the scrap, whether old or new. He also developed an argument that in the absence of any possibility of verifying the nature of the scrap, the term 'old scrap' of copper would denote only the indigenous scrap, since there was a scope for verification of the same by the departmental authorities. He drew our attention to the 1981 Budget proposals under which Item 26A was amended and one mote sub-item (lb) was specified in respect of waste and scrap. He relied on the Finance Minister's Budget Speech of 1981 which reads as follows: The other major area where rationalisation of the tariff entries has been proposed is in regard to non-ferrous metals under the respective entries in the Central Excise Tariff. There has been considerable debate and dispute on the question of assessment of waste and scrap of these metals. To set these at rest, it is proposed to specifically cover waste and scrap of these metals under the respective tariff entries.
5. The main and only question to be considered in this case is the applicability of the Notification 119/1966. As rightly pointed out by Shri Lakshmikumaran, Clause (ii) of the Notification 119/66 will not apply as the appellants have not put forward any case that the waste utilised in the manufacture was out of the duty-paid copper or copper alloys. Notification 119/66 envisages only waste or scrap obtained from copper or copper alloys on which duty had already been paid. It contemplates only waste arising out of the duty-paid copper. Imported waste can never satisfy this condition. So, the applicability of Clause (ii) is ruled out. Even the learned Counsel for the appellants does not rely on Clause (ii). In para 2 of the appeal, it is only said that they were using the imported scrap. There is no submission in the appeal that the imported scrap waste or scrap utilised by them was out of duty-paid copper or copper alloy.
6. We are then left with Clause (i) of the Notification 119/66. For the purpose of convenience, it is essential to consider this aspect under two heads, i.e. for the period prior to 1.3.1981 and for the period subsequent to 1.3.1981. In regard to the period subsequent to 1.3.1981, till 4.11.1981 we find that there have been three instances of import as follows: Month-year Name of Importer Description Quantity April, 1981 Nitual Corpn. High Imported Mixed Cop- 19,800.000 May, 1981 Ranchoddas Puru- Telewire Copper Scrap 18,377.900 Sept., 1981 Precious Industries, Copper Scrap.
16,876.000 In view of addition of Clause (v) by Notfn. 32/31, dt. 1.3.1981, it is clear that the appellants are liable to pay the duty unless and until necessary proof is adduced before the assessing authorities that the countervailing duty has been paid by the importers.
7. In respect of the period prior to 1.3.1981, it is seen from the Annexure attached to the order that it comprises of two categories - imported copper scrap (Annexure 'A',) and local scrap purchased consisting of indigenous scrap and also scrap of imported origin purchased locally (Annexure 'B'). Clause (i) of 119/66 refers to old scraps of copper. It was pointed out that the Notification did not specify old scrap being indigenous or imported. Shri Lakshmikumaran argued that the term 'old' must be given its due significance and since the Bills of Entries filed by the appellants did not indicate that what they imported was only old scrap, they are dutiable. The adjudicating authorities have quantified the duty on the basis of the period October '79 to June '80 and July '80 to November '81 based on the difference in tariff. The total imported copper for the period October '79 to June '80 works out to 54,813.400 Kg. Giving the margin for burning loss, the total quantity has been determined as 53,169 Kgs. The rate of duty has been calculated on that basis. In the absence of any documents filed by the appellants to prove that what was imported by them was only old scrap, the appellants are liable to pay duty on this quantity. At the risk of repetition, we must say that the Bills of Entry or the Invoices do not disclose that what was imported was old scrap.
8. Coming to the period July '80 to November '81, the adjudicating authority has fixed the quantity as 1,57,735.100 Kgs. He has added to it the scrap of imported origin locally purchased plus scrap of Indian origin locally purchased. The total, after deducting the burning loss, has been determined as 1,85,869.500 Kgs. In this connection, we are of the view that in any event indigenous scrap should be excluded as it has been purchased from local market. In regard to scrap of imported origin locally purchased, it is pertinently pointed out by the appellants that several persons had imported scrap under open general licences. The possibility of the imported scrap, i.e. all scraps of foreign origin getting mingled up with indigenous scrap cannot be ruled out. So, when the appellants have purchased scrap from the local market, the benefit of such admixture of the scrap should be accorded to them. It will be inequitable and unjust to call upon the appellants to produce evidence that they were old scrap because the appellants are not the importers of such scrap. In this connection, we may also point out that Notification 119/66, Clause (iv), refers to "copper and copper alloys in any crude form purchased from the market on or after 20th day of August 1966". Prior to 1.3.1981, for excise purposes, waste and scrap were deemed to be copper in any crude form. So, such copper and copper alloys purchased from the local market after 28th August, 1966, shall stand exempted. In this view, 18,891.400 kgs. local scrap plus 14,991.500 kgs. imported origin scrap purchased locally, i.e. in all 33,882.900 kgs. should be omitted In respect of the remaining two quantities up to March 1981, since there is do documentary proof by way of Bills of Entry or Invoices that what was imported was old scrap, the appellants will not be entitled to any relief.
9. It was pointed out by the appellants that the classification lists have been sent in respect of the units and it is not open to the department to claim the duty without the amendment of classification lists. There is, however, no estoppel in revenue matters and it is always open to the department to issue show cause notice whenever a short levy is detected. The lower authorities have not included copper waste or scrap which during the period prior to 1.3.1981 were deemed as copper in any crude form while arriving at the quantity of copper wire bars for the purpose of demanding the duty. A plea of discrimination has been raised by the appellants. The Bench directed Shri Lakshmikumaran to ascertain relevant information from the Collector and forward the same to the Tribunal. Shri Lakshmikumaran had verified from the Collector and submitted the available particulars. In regard to M/s. Bralco Metal Industries, from 4.11.81 the copper scrap received was cleared by Customs on Nil duty provisionally because stay orders have been issued from Bombay High Court. These demands have been issued after 1.3.1981. M/s. Rashtriya Metal Rolling Mills and M/s. Elphinstone Metal Rolling Mills are using only indigenous scrap purchased from open market since beginning. M/s. Precious Industries are not manufacturing the products falling under T.I 26A. Further, it is always open to the department to issue notices to them and claim the duty payable, if any The plea of discrimination cannot be raised especially when the appellants are claiming exemption under the Notification.
10. In view of the above discussion, the order of the lower authorities is confirmed so far as it relates to the copper scrap imported by the appellants for the period October '79 to June '80, and for the period June '80 to February '81. For the imports during April, May and September '81, it is open to the appellants to produce documentary evidence to the concerned authorities for having paid the countervailing duty. On such proof, these items will also stand exempted. The appellants will also be entitled to the burning loss provided by the adjudicating authorities. The quantity of scrap purchased locally from 1.3 1981 to November '81 will be given the benefit of the exemption, irrespective of the foreign origin or indigenous scraps.
Not being in agreement with the conclusion of ray learned senior, the Vice-President and Brother Santhanam, the separate minority order below is given.
1. This appeal under Section 35 of the Cential Excises & Salt Act, 1944 is against the Order No. A-549/ B1/116/83 dated 8.3.83 passed by the Collector of Central Excise (Appeals), Bombay.
2. The appellants are manufacturers of copper wire bars, strips, rods, flats and bus bars among other things since November, 1979 when they obtained a Central Excise Licence. They were using imported scrap as well as scrap purchased from the local market and after ascertaining the position from other similar units, they filed a Classification List on 25th September, 1979 showing copper and copper alloy flats, bars and flats as falling under Tariff Item 26A and exempted from duty under Notification No. 119/66 dated 16th July, 1976. They state that there were three units manufacturing similar goods with similar process but were not paying duty since copper flats above 10mm thickness and copper rods/copper wire bars were exempted under Notification No. 119/66. One of the three units which manufactures other goods; namely, M/s. Alloy Casting Works is manufacturing other excisable goods and was required to file a Classification List. The appellants say that this Classification List showing the goods falling under T.I. 26A(1) and 26A(1A) and exempted by virtue of Notification No. 119/66 dated 16.7.1976 was duly approved by the then Assistant Collector. The appellants, therefore, filed their Classification List showing the said goods as exempted only after confirming the position from the three manufacturing units and commenced their production and started clearing their goods without payment of any duty. While the approval of the Classification List was pending, a show cause-cum-demand notice dated 10th April, 1980 was received for duty of Rs. 2,02,400.42 on copper wire bars and copper rods manufactured and cleared from November, 1979 to March, 1980 alleging that it was short-levied as Notification No.119/67 did not apply to goods manufactured out of imported copper scrap and also as the appellants were adding some percentage of zinc Though the show cause-cum-demand notice was issued by the Superintendent, the then Assistant Collector duly approved the said Classification List on 3rd July, 1980 approving the said goods as exempted from the payment of excise duty. They therefore replied to the notice contending that Clause (i) of the Notification does not make any distinction between old scrap whether imported or indigenous and they had used imported old scrap i.e. imported old copper tubes, burnt wires and radiators etc.
and therefore the question of payment of countervailing duty did not arise. They also contended that hundreds of tons of copper scrap was being imported under OGL and was sold in the local market which could not be distinguished from the indigenous scrap. After the new Budget, afresh Classification List was filed on 22.6.1980 which was also approved by the Assistant Collector on 30.8.1980. Though the two aforesaid Classification Lists were approved the show cause-cum-demand notice was not withdrawn but fresh notices, one after the other, covering the said goods from November, 1979 onwards, were issued. la all these notices, the two grounds were that Notification No. 119/66 does not apply to products made out of imported scrap and when some percentage of zinc is added at the time of manufacture. The appellants believed that after their personal hearing the notices would be withdrawn since (1) The Director of Inspection & Customs Excise, by a letter dated 11th April, 1966, had clarified that imported copper scrap is to be treated on par with indigenous copper scrap and (2) The Assistant Collector Div. VIII in a letter dated 8th March, 1977 to his counterpart had stated that no demand for duty on manufacturers of copper and copper alloy, consuming imported copper/brass scrap brought into India without payment of countervailing customs duty under Section 2A, should be raised since imported scrap has to be treated on par with indigenous copper and copper alloy. Despite filing replies to the notices, no decision was taken for two years arid the total amount of duty rose to Rs. 17,68,264.19. Aggrieved by this a Writ petition was filed in the High Court at Bombay and the Assistant Collector was given two months time by the court to dispose of the notices. Thereafter a list showing the copper scrap received from 1st October, 1979 to 30th November, 1981 was supplied as required. From this, it will be seen that barring the use of imported copper scrap in April 1981, May 1981 and September 1981 all the copper scrap used for the manufacture is either locally purchased or copper scrap imported prior to 1st March, 1981. By his order issued on 15th September, 1982, the Assistant Collector rejected the appellant's contention and out of the demand of Rs. 17,68,264.19 confirmed the demand for Rs. 7,50,851.75. The appeal was rejected by the Collector of Central Excise (Appeals) Bombay in the impugned order dated 8th March, 1983.
(i) Classification List dated 25.9.1979 and 22.2.1980 showing these goods as manufactured from imported as well as indigenous copper scrap and exempted were both approved by the Assistant Collector on 3.7.1980 and 30.8.1980 respectively. Without amending or revising these classification lists, demands were issued for duty on the goods which were already manufactured and cleared in accordance with the said Classification Lists ; (ii) Clause (i) of Notification No. 119/66 dated 16.7.1976 does not make any distinction between imported and indigenous scrap and if old scrap, whether imported or indigenous, is used, the exemption has to be granted. The question of producing duty-paid documents in respect of old scrap does not arise; (iii) Clause (ii) refers to fresh scrap which says that additional duty leviable is to be paid and in any event prior to 1.3.1981, no additional duty was leviable and accordingly was not recovered from importers on the scrap imported; (iv) Several thousands of tons of copper scrap were imported under OGL and sold in the local market without distinguishing it from indigenous copper scrap; (v) Without adjudicating the cause shown in the earlier show cause notices, the authorities had no power to issue a fresh notice-cum-demand without rendering such notices meaningless; (vi) There is no test to find out which copper scrap in the market is imported and which is indigenous; (vii) The interpretation given by the Department to the Notification would open the flood gates to fraud, if the goods manufactured from scrap available in the market are treated as exempted and those manufactured from imported scrap are denied exemption, because any party could then import copper scrap in different names and show it as purchased from the market, thereby avoiding Excise Duty. The Notification does not lay down that copper or copper alloys should be manufactured only or exclusively out, of the materials mentioned in the said Notification; (viii) The Appellate Collector admits that scrap is to be treated as crude metal till 1st March, 1981 and in the next paragraph gives a finding contrary to this admission.
(ix) The Department is fully aware that bonds are executed by importers with the Customs Authorities for the countervailing duty and the Central Excise Authorities have no power to raise demands equal to the countervailing duty.
(x) The appellants were never called upon to clarify the position as regards imported and local market scrap. A manufacturer cannot be liable for duty on the same goods both to the Customs and the Excise Authorities. If countervailing duty was leviable, it would have been recovered by the Customs Authorities or a bond taken. If the duty was not leviable, the Customs Authorities cannot recover it nor can the Excise Authorities deny the exemption available under the Notification; (xi) The following three units are not paying duty on similar products and no demands have been issued to them.
(xii) One of the grounds for confirming the demand is that it was not made known to the Department that the goods were manufactured out of imported scrap. But this is incorrect since in the first reply dated 10th July, 1980 it was specifically stated that part of the goods were manufactured from imported scrap but the subsequent show cause notices were identically worded to the first notice and this was ignored. In any case, all the copper scrap shown in the Annexure to the order is exempt, being locally purchased and no identification between imported and indigenous scrap being possible.
(xiii) Regarding the imported scrap mentioned in Annexure 'A' to the order only three consignments were imported after March, 1981 and the countervailing duty would be payable by the three importers mentioned and it is not for the Central Excise Authorities to determine the issue by levying the additional duty in lieu of countervailing duty.
(xiv) The learned Appellate Collector merely enumerated the contentions in the appeal but did not deal with them. He erred in holding that the appellants had ample opportunity to show that there was double accounting of the excise duty since, in fact, the appellants never knew the basis for the calculation. Moreover, it was his duty to rectify the mistake when it was pointed out to him not only in respect of double accounting but also the extent of loss of weight on account of foreign material.
(xv) He failed to take into account that notice was given requiring the appellants to show why duty should not be recovered on the ground that they were manufacturing the goods out of imported scrap but were not called upon to show as to which of the scrap was old and which was fresh.
(xvi) A list of names of eleven manufacturers to whom no such show cause-cum-demand notices have been issued is furnished and this amounts to singling out the appellants for discriminatory treatment and their right guaranteed under Article 14 of the Constitution.
(xvii) The appellants have received notices demanding countervailing duty on imported copper scrap which pertain to the period prior to 1st March, 1981 and their Writ petition has been admitted and an injunction has been issued against the Customs Authorities. Since this matter is subjudice, the Central Excise Authorities cannot recover the same duty by denying the said exemption which will amount to denial of the relief granted by the High Court. Though a copy of the petition was produced before the Appellate Authority, he did not consider the same.
In conclusion, the appellants contend that the demand notices are otherwise illegal and liable to be set aside.
4. Shri Bhandare reiterated these contentions. He explained that since 1979, copper wire bars, strips, flats rods and bus bars were being manufactured. The present dispute is in respect of rods, flats and wire bars made out of copper/copper alloys. The Classification List was filed after being fully satisfied that other similar manufacturers were availing of exemption Notification No. 119/66 claimed, file referred to the show cause notice dated 10.4.1980 which inter alia quoted the notification and stated that imported scrap is not specified as material thereof under Clauses (i) to (iv) of the notification and the appellant is therefore, not entitled to the exemption. This notification, according to the notice, exempts goods falling under T.I.26A(i) and (ia) if manufactured from any of the following materials or a combination thereof- (ii) Scraps obtained from Copper and Copper Alloys where the prescribed amount of Excise duty or as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act 1934 (32 of 1934), has been paid on the Copper or the Copper content of alloys or (iii) Virgin Copper in any crude form on which the prescribed amount of duty of Excise, or as the case may be, the additional duty leviable under Section 2A of the Indian Tariff Act 1934 (32 of 1934) has already been paid or (iv) Copper and Copper Alloys in any Crude form, purchased from the market on or after 20th day of August 1966 (1) This Notification shall be deemed to have taken effect from.
24th day of April 1964.
(2) The Clause (iv) shall be deemed to have been inserted with effect from 29,8.1966.
(3) The word inserted vide Notification No. 59/68 dated 23.3.1968 shall be deemed always to have been inserted (vide Notification No.119/66 of 16th July, 1966, as amended by Notification No. 30/67 of 4th March, 1967. Notification No. 59/68 dated 23.3.1968 and Notification No. 17/68 dated 1.3.1969). "Since the said Notification does not specify the imported scrap as material under Clause (i) to (iv), M/s. Kishore Metal & Wire Industries are not eligible for the exemption under the said Notification," it has also alleged.
5. He also drew attention to the second allegation that since zinc is not one of the four materials specified, the products made from copper scrap using zinc are not eligible for the exemption, but added that this was not pursued. Learned Counsel next drew attention to the letter dated 11.11.66 from the Director of Inspection to the Collector of Central Excise stating that the Board have, after examination of the whole question, now clarified that since imported scrap of copper and copper alloys has to pay w.e.f. 20.8 963 customs duty @ 40% plus regulatory duty @ 10%, the indigenous scrap would suffer no disadvantage notwithstanding the fact that imported scrap does not have to pay any countervailing duty under Item 26AU) of the Central Excise Tariff. In view of this, "the present position of treating the indigenous and the imported scrap at par in the matter of assessment of crudes of manufactures produced therefrom does not call for any change". He then referred to the letter dated 8th March, 1977, addressed to the Collector by the Assistant Collector, Bombay VIII stating that since imported scrap has to be treated on par with indigenous scrap of copper and copper alloys, it is not necessary to raise demands for duty on the manufacturers of copper and copper alloys consuming imported copper/brass scrap brought into India without payment of countervailing customs duty under Section 2A. Shri Bhandare urged that this was further confirmed by the fact that a list of 11 manufacturers was given, from whom no duty was collected or demands issued. It would, therefore, be clear that Clause (i), old scrap of copper alloys has to be interpreted as covering all scrap obtained from the market, whether indigenous or imported. Shri Bhandare also cited 1982 ELT 73 which deals with Notification No. 33/81 dated 1.3.1981 as amended, by which copper scrap was made dutiable, wherein the Collector of Customs (Appeals) Bombay held that under clause (b) of Notification No. 33/81 waste and scrap is exempted if it arises from products falling under any item other than 26A, manufactured from copper and since the imported scrap had arisen from copper wire not liable under any sub-item of 26A and would fall under item 68 or 33B, the conditions were satisfied by copper scrap (Berry) of NARI specification. No countervailing duty would, therefore, be payable as it was exempt from payment of central excise duty. This variety of scrap also figured in the consignments used in the present case, as can be seen from Annexure 'A' to the order-in-original. Finally, Shri Bhandare contended that the show cause notice was on the ground that products made from imported scrap (on which countervailing duty was not paid) was not exempted under Notification No. 199/66. At the appellate stage, it has been held that they failed to identify the copper wire bars manufactured exclusively out of old scraps. The substance of the notice cannot legally be changed in this manner. Further, the classification lists approved, contained a positive declaration that "old scrap" was being used and this was verified and approved by the Department. He, therefore, urged, that the appeal be allowed.
6. The learned SDR stated that the whole case hinged on interpretation of Notification No. 119/66. An analysis of Notification No. 119/66 would show that item (i) covered 'old scrap' meaning indigenous or open market scrap, item (ii) covered waste and scrap obtained from duty-paid indigenous or imported copper and copper alloys, (iii) covered virgin copper, indigenous or imported, (iv) covered copper and copper alloys in any crude form purchased from the market after 20 8.1966 and (v) covered waste and scrap falling under item 26A(1b) in respect of which central excise or countervailing duty has already been paid on the copper or the copper content of the alloys. Products made from these various materials were exempted because it was not the intention to recover duty twice. Scrap was treated on par with duty-paid copper and copper alloys, but this would not apply to non-duty paid imported scrap. Prior to 1.3.1981, waste and scrap were not mentioned in item 26A. However, from Notification No. 276/82 which prescribes the same rate of duty for ingots etc. under sub-item (1) and for wire bars etc.
under item 1(a) and for scrap under item 1(b), it could be seen that it was the intention, even in the predecessor notifications, to treat them on par. Admittedly in the present case no duty under item 26A was levied on the imported scrap. Therefore, the products from which it is made have to bear this duty. It would be wrong if duty is being recovered on the indigenous scrap used but if this alongwith imported scrap was used, the duty should be confined to the imported content which had borne no duty c.f. 1977 ELT J61 U.O.I. v. Tisco 1975 Cen-Cus 62C; ECRC 450-S.C. The department did not insist on proof of payment of duty on scrap purchased locally in order to avoid harassment. Since copper in any crude form, which included scrap (other than old scrap) coming under sub-item (iv) was more specific than old scrap (which again did not include imported scrap) and duty had not been paid on it, the demands for duty were in order.
7. Citing the case of Metal Extruders-Order No 915/83-B, Shri Lakshmikumaran contended that the question of discrimination urged by the appellant was not material. In fact, on the basis of the order in this case, duty could be demanded from the other manufacturers mentioned. As regards the departmental communications, they were purely internal documents and were irrelevant. Besides they relate to a period prior to 1.3.1981 when even virgin copper was exempt from countervailing duty. The appellant has also not shown that using imported scrap was more costly than indigenous scrap for the reasoning of the Director of inspection to be applied to this case. The learned SDR also cited 1983 ECR 911- Khandelwal Metal and Engg. Works in which the Tribunal held that imported brass scrap is not entitled to concessional rate of duty nor exempt from countervailing duty. The Appellate Collector had unfortunately mis-interpreted the provision in dealing with the case of M/s. Bralco cited by learned Counsel for the appellant. In his further arguments, Shri Lakshmikumaran stressed the adjective 'old' qualifying 'scrap of copper' in sub-item (i) of Notification No. 119/66. The import documents do not mention 'old' because the scrap cannot come under this category as only remnants, residue, metal clippings and other useless and discarded waste, can be considered 'old scrap'. It is not scrap of old articles but old scrap that is entitled to be used for obtaining exempted products. He also tried to argue that only old scrap of pure copper and not copper alloys was covered but gave up this on being shown the original notification.
However, he relied on S.C. (47) S.T. cases 1981 Rainbow Steel v.Commissioner Sales Tax U.P. in regard to the meaning of old and discarded machinery to support this argument. He also relied on the Orient Paper Mills case to support his plea that instructions of executive authorities cannot be used to support unintended benefits. He also clarified that he had checked up the position regarding the 12 manufacturers alleged to have been discriminated against favourably vis-a-vis the appellant, as directed by the Tribunal at the earlier hearing. Only 4 were in Bombay and the position was as follows: In one case, from 1.3.1981 to 3.11.1981 demands have been raised on scrap on which no countervailing duty was paid and from 4.11.81 copper scrap is provisionally cleared free of duty under orders of the High Court. The other three units are using only indigenous scrap purchased from the open market or are not manufacturing products falling under item26A.8. In rebuttal, Counsel stated that there was no question of raising demands against the parties in question for the period prior to 1.3.198], as provided by the learned SDR, since these were already time-barred. In fact, Elphinstone Mills, is one of the firms listed, and the departmental letters relate to withdrawal of the demands raised against them, so discrimination remains. From the imported consignments listed, it may be seen that till April, 1981, almost all were covered by bonds given to the customs. After March 1981, there were only 3 imported cases. A Bill of Entry showing payment of countervailing duty was available in respect of Nitual Corporation. In the other two cases the Bralco case was relevant since they were scrap of products not falling under 26A like telewire. In this connection. Counsel drew attention to the injunction granted against the customs authorities restraining them from enforcing demands on copper scrap, imported prior to 1.3.1981. If this matter was finally settled, the duty would be either payable or not recoverable and the dispute would be resolved one way or another.
9, The whole case rests on interpretation of the word 'old scrap of copper and copper alloys' used in Notification No. 199/66. The fact that such scrap was allowed to be imported under O.G.L. and that hundreds of tonnes had been imported and gone into the market, as stated by the appellants has not been controverted by the Department.
That no customs duty was collected on such, scrap imported prior to 1.3.1981 has also not been rebutted nor the fact that the matter of recovery of countervailing duty on it is under dispute. It is correct that action against other manufacturers of Similar products from similar raw materials, by way of demands for central excise duty, were particularly for the period prior to 31.3.1981, as alleged by the appellants, has not been furnished to us and that there has been discrimination against the appellants is patent. The Department is silent even as regards four out of the eleven named manufacturers for whom information was furnished to us, on this score. To cap all this, the appellants have produced correspondence to give an explanation why, as recently as 1977, imported copper/brass scrap, not charged to countervailing duty, was to be treated on par with indigenous scrap in regard to examination of products. Admittedly, this is departmental correspondence but it has not been either denied or explained by the respondents. All this can only lead to the irresistable conclusion that the words "old scrap" used in the notification are not unambiguous and that there has been discrimination against the appellant. We are, therefore, unable to accept the arguments of the learned SDR aimed at shifting the onus on the appellants. We also find considerable force in the contention of Shri Bhandare that it is for the customs authorities to recover additional duty of customs equivalent to central excise duty if recoverable on scrap of copper/copper alloys and the central excise authorities cannot recover this duty by the back-door.
10. So far as the notification is concerned, prior to amendment in March 1981, it deals with products. These are exempted if made- from old scrap by Clause (i); from scrap of central excise duty paid indigenous or countervailing duty paid copper/copper alloy by Clause (ii); from virgin indigenous/imported duty paid copper by Clause (iii); and from copper/copper alloys in any crude form purchased from the market on and after 20.8.1966 by Clause (iv). In the notification due regard must be paid to the terms 'virgin" and 'purchased from the market' in interpreting the term "old scrap" and this also seems to re-inforce the plea of the appellants, that no duty is chargeable upto 31.3.1981.
11. As regards consignments of scrap imported after 1.3.1981, when it was specifically incorporated into the central excise tariff, it is for the customs authorities to recover the additional duty under the customs law. Once this duly is recovered, there is no question of recovering duty a second time via the products made from it. Even if on a strict interpretation the exemption does not apply in view of Clause (v), covering scrap in respect of which duty c.v. duty has been paid on the copper or copper content of the alloys, and the products are liable to duty, since the copper or copper content of the scrap imported has not borne the additional duty, this duty would ultimately be refundable, if the importer is required to pay the duty. Since the products are made not only from such scrap but also other metals, like zinc and old scrap, on which no duty under T.I. 26A is payable and these would also be some loss in melting the imported scrap, the department would need to work out the exact quantity on which duty is to be demanded in the manner conceded by the learned SDR. In the circumstances of this case, if it cannot be shown by the appellants that countervailing duty has been paid on the copper scrap imported after 1.3,1981 and utilised, the department may consider whether a bond would suffice to cover the duty on the subject scrap consignments should no countervailing duty be held payable by the courts.
12. The department has not dealt with the contentions that the demand cum show cause notices were sterotyped and contrary to the reply to the first notice and that while show cause notices were being issued by the Superintendent, the Assistant Collector was approving the very Classification Lists claiming the exemption. In view of my findings, I am not called upon to go into these contentions.
13. We accordingly set aside the impugned order and allow the appeal subject to ray observations in para 10.
In accordance with the majority order, the appeal is allowed to the extent indicated therein.