1. The Revision Application under Section 36 of the Central Excises and Salt Act, 1944 arising out of Order-in-Appeal No. 264/BR/81, dated 28-9-1981 passed by the Appellate Collector of Central Excise, Calcutta has been transferred to the Tribunal for disposal, as if it were an appeal in terms of Section 35P (2) of the Act.
2. The appellants have a factory at Jamshedpur in which they manufacture steel ingots and semi-finished steel with the aid of electric arc furnace from steel melting scrap. The factory went into production in 1974 and was manufacturing only steel ingots, which were made from duty paid steel melting scrap and were exempted from duty under Notification No. 66/73-C.E., dated 1-3-1973. This provided that steel ingots were fully exempt, if made from fresh un-used melting scrap on which appropriate duty had been paid provided no proforma credit or set-off have been availed of. If fresh un-used duty paid melting scrap was used, in admixture with other material, the exemption was limited to the duty paid on such steel melting scrap, under Notification No. 42/74, dated 1-3-1974, While Notification No. 66/73 was still in force in April, 1982, when the Revision Application was filed, Notification No. 42/74 was superseded by Notification No.144/75, dated 7-6-1975 which continues to be operative. The appellants state that they purchased fresh un-used duty paid steel melting scrap, amongst others from M/s. Tinplate Company of India and the Agrico Division of M/s. Tata & Steel Company, both at Jamshedpur. These two units were working under proforma credit. They obtained duty paid tin bars/hot rolled strips from T1SCO and took credit of duty in their proforma credit account. Steel melting scrap arising in the process of manufacture was cleared by them on payment of duty. The melting scrap purchased from M/s. Tinplate Company was pressed bundle scrap or P.B.scrap, while that purchased from Agrico was phowrah cuttings, though the scrap purchased from these parties was steel melting scrap, the excise officer incharge had assessed the scrap under Item 26AA. The local Excise Officers were of the view that the scrap arising from material which had paid duty under Item 26AA could not be cleared on payment of duty at a lower rate under Item 26. The appelants were denied the exemption available to the steel ingots made from such fresh un-used duty paid steel melting scrap and their refund claim was rejected by the Assistant Collector in his order dated 19-7-1980, on the ground that since duty on scrap was paid under Item 26AA, exemption under the Notification referred to above was not admissible. In his order, the Appellate Collector held that whether classification of the scrap under Item 26AA was a mistake or not, the appellants are not entitled to the exemption under Notification No. 55/73 (presumably No.66/73). With regard to Notification No. 42/74, the refund claim was made on the ground that the appellants had paid duty on the ingots under protest and the Central Excise Officer had allowed that the P.B.scrap received under Rule 56A is classifiable under Item 26 with effect from 21-10-1975. "Their refund claim is in respect of the duty paid on the melting scrap. Because they have already received the same under Rule 56A of the Central Excise Rules, 1944, therefore, this exemption notification is inapplicable. The Assistant Collector has rightly rejected the refund claim of the appellants. The appeal is rejected," was the finding.
(a) the learned Appellate Collector has not considered the relevant submissions and neither he nor the original authority cared to verify the contention that the scrap obtained was nothing but steel melting scrap and could not be used for any. other purpose ; (b) both the authorities ignored the fact that in the case of Tinplate Company, it has been accepted by the Assistant Collecter that the P.B. scrap was melting scrap classifiable under Item 26 ; (c) both authorities ignored the fact that the Assistant Collector granted refund for differential duty paid by the Tinplate Company for the period 12-8-1975 to 20-10-1975 and its claim for refund for the period prior to 12-8-1975 was under his consideration ; (d) it is a matter of fact that phowrah cuttings purchased from Agrico was always sold and used as steel melting scrap ; (e) the learned Appellate Collector failed to appreciate that, even if there could be some doubt about phowrah cuttings, there was not the least doubt about classification of P.B. scrap purchased from Tinplate Company under Item No. 26, as already done by the Assistant Collector ; and the Appellate Collector should have allowed refund in respect of the steel ingot which could be computed as having been manufactured from P.B. scrap ; (f) the ground for rejecting the benefit under Notification No. 42/74 was passed on the wrong presumption that proforma credit was taken by the appellant for duty paid by Tinplate Company, as the appellants did not work under Rule 56A. If they had so worked, there would have been no question of claiming exemption from duty on steel ingots ; (g) by denial of exemption and refund, the appellants have been discriminated against and put to heavy financial loss at the rate of Rs. 330/- or more per M.T. (h) at the material time, the effective rate under Item No. 26 was lower than the minimum effective rate under Item 26AA viz. Rs. 200/-(Rs. 100/- Basic+ Rs. 100/- auxiliary) as against minimum Rs. 330/-(Rs. 165/- Basic+Rs. 165/- auxiliary) per M.T. But the selling price of steel ingots inclusive of the duty was same and even with the exemption the appellants were at a disadvantage of Rs. 130/- or more per M.T. compared to other mini steel plants manufacturing steel ingots from duty paid steel melting scrap. Even on equity consideration the claim for refund deserves to be sanctioned.
4. When the case came up for hearing on 20-12-1983, the appellants requested for time to collect further information and documents relating to years 1973-74 onwards and information pertaining to the two licensee from whom the steel melting scrap in question was purchased.
They were accordingly granted time.
5. Shri K. Narasimhan, learned Advocate for the appellants, assisted by Shri R.B. Sinha, Consultant, confirmed having filed extracts of the writ filed by the Tinplate Co. in regard to assessment of scrap arising in the trimming of black sheets rolled from tin bars. He explained that duty was recovered at Rs. 330 per M.T. by the department on the scrap which was received by the appellants. Duty at the full rate was again charged on the ingots manufactured. He referred to the three Classification Lists dated 19-3-1974, 21-8-1974 and 16-7-1976 relating to the relevant period 9-8-1974 to 28-5-1975. Under Item 3 therefore exemptions 42/74, 55/74 and 58/74 were claimed for the said steel ingots. According to 54/74, steel melting scrap, falling under Item 26, obtained in the manufacture of Iron and Steel Products from, inter alia, iron or steel products, which have already paid the appropriate duty under Item 26AA, is wholly exempted, if no set-off of duty has already been obtained. The Government has also clarified that duty on scrap is leviable at the rate for scrap and not the rate at which proforma credit was claimed. From Paras 4 and 5 of the Order-in-Original, it is clear that the claim for refund was rejected because (a) the scrap had borne duty under Item 26AA and there was no exemption to ingots from duty equivalent to duty paid on goods of Item 26AA used in their manufacture ; and (b) that a clarification was sought by the appellants from government to extend the scope of Notification Nos. 42/74 and 144/75 to their scrap to grant ex gratia relief. Shri Narasimhan referred to the advice of the Ministry of Law dated 2-3-1974, cited in the writ of M/s. Tinplate Co. that waste arising out of goods received under Rule 56A will be assessable at the effective rate of duty taking into account the relevant exemption notifications and there is no warrant for excluding them. It is an admitted position that press baled scrap was used and this is fit only for remelting and has been so used. It ought to have paid Rs 200 instead of Rs. 330 and the benefit of this passed on to the ingots made by the appellant in terms of Notification No. 42/74, which does not mention, as in the case of Notification No. 66/73, that the scrap should fall under Item 26. The learned Advocate also stated that the appellate order was factually incorrect regarding availment of the proforma credit and was even otherwise not intelligible, as Notification No. 55/73 (presumably 66/73) is not in issue here. When the excess duty had been refunded to Tinplate Co. on similar scrap for subsequent periods, the benefit claimed cannot be denied to the appellant for similar scrap used. Shri Narasimhan claimed that the refund had been wrongly disallowed by both the lower authorities.
6. Shri Lakshmikumaran, opposing the appeal, said that the claim for refund was under Notification No. 42/74. Notification No. 66/73 was intended to avoid payment of duty again when fresh duty paid scrap was used for remelting into ingots. It was not relevant in the present case. He agreed that the order of the Appellate Collector was not correct otherwise also, as no proforma credit was availed by the appellant. He, however, drew a distinction between a defective ingot which can be re-rolled and becomes "Rerollable scrap", on the one hand : and "melting scrap", on the other. What is used in the present case is scrap of steel and not steel melting scrap. In the case of Universal Cables v. U.O.I. it was held that defective goods were excisable goods (1977 E.L.T. 92). In this case, duty was paid under Item 26AA as the goods were products obtained after rolling tin bars and not classifiable as scrap. He urged that Notification No. 42/74 is a set-off notification and the prescribed procedure could not be followed since the duty paid was more than the set-off claimable. . Rule 56A procedure was also not followed. The notification speaks of "fresh unused duty paid steel melting scrap" and does not mention "falling under Item 26" as this is unnecessary. The scrap was obviously not of the stipulated description having been classified as iron and steel products under Item 26AA. The Assistant Collector had rightly rejected the claim for refund according to Shri Lakshmikumaran.
7. The short question is whether ingots, assessable under Item 26, can be given the benefit of exemption to the extent of duty leviable or chargeable under Item 26 on the raw material, namely, steel melting scrap, even when the scrap has been charged to the higher rate of duty, as products, under Item No. 26AA. So far as the scrap received from the Tinplate Co. is concerned, it was admittedly press baled steel melting scrap and it transpires that duty at the rate under Item 26AA had been incorrectly levied. Factual information regarding powrah scrap is, however, not available to us.
8. Notification No. 42/74 grants exemption to steel ingots, falling under Item 26, from so much of the duty leviable as is equivalent to the duty leviable, and proved to have been paid, on the fresh unused duty paid steel melting scrap, used in admixture with other materials, in their manufacture. It is significant that unlike Notification No.66/73, there is no stipulation that the scrap should have borne duty under Item 26 alone. The words "duty leviable" have been used. It is also seen from Notification 54/64 that steel melting scrap, falling under Item 26, can also be obtained from iron and steel products, which have paid duty under Item 26AA, and that it is completely exempted, if no set-off was obtained. We are, therefore, unable to accept the contention of the learned Senior Departmental Representative that the words "falling under Item 26" are to be read into Notification No.42/74. All that is necessary to avail the benefit of the exemption is that the steel ingots should be made using fresh unused duty paid steel melting scrap and that the duty on the scrap has been proved to the satisfaction of the proper officer to have been paid. The appellants are claiming only the benefit of the correct deemed rate (on the basis of government's clarification) and not the actual duty charged from the suppliers of the scrap, which is higher. We do not see sufficient force in the arguments of the department to deny them this benefit.
9. The amount of refund claimed is seen to be Rs. 3,26,314. 80p. It will be for appellants to satisfy the lower authorities in regard to the correctness of this claim, in terms of Notification No. 42/74. We confine this order to allowing the appellants' claim for refund of the amount that would have been allowed as set-off in terms of this notification, but for the fact that duty on the steel melting scrap had been paid under Item 26AA instead of the correct rate applicable to such scrap under Item 26 and direct the authorities to determine and refund the amount admissible. The appeal, for claim of the benefit of Notification No. 42/74 in respect of steel melting scrap consumed by the appellants is allowed in the light of observation aforesaid.