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Jay Electric Wire Corporation Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Delhi
Decided On
Reported in(1984)(18)ELT582TriDel
AppellantJay Electric Wire Corporation
RespondentCollector of Central Excise
Excerpt:
.....mentioned by the appellate collector, the invoices produced would show that the goods were sold as wire scrap. he relied on the decision of the madras high court (1981 elt 233) where it was held that filaments continue to be tungsten and cannot be treated as parts of lamps since they need further processing.5. the departmental representative shri kunhikrishnan stated that duty is being paid on the finished product. so, manufacture is not in dispute. in the case of brass scrap, it was held that it fell under item 26-a [elt 292 (del.) -khandelwal]. he added that according to the mc-graw hill dictionary, the characteristics of the thicker wire are different from the thinner wire as the process of drawing, coiling, heating, etc. crystalises the tungsten and makes the filament brittle.shri.....
Judgment:
1. The revision application dated 1st September, 1981, under Section 36 of the Central Excises and Salt Act, 1944, against Order-in-Appeal passed by the Appellate Collector of Customs and Central Excise, Madras, has been transferred to the Tribunal by the Government of India for disposal as an Appeal in terms of Section 35P(2) of the said Act.

2. The appellants import tungsten wire and molybdenum wire of a higher micron size and draw them to finer sizes, which are supplied as such, as also transferred to their own coiling plant, for being converted into filaments. While drawing the wire, it breaks into pieces which are collected periodically and disposed of as scrap. The appellants say that by a mistake of law they filed a classification list dated 6th September, 1979, classifying these broken pieces as a commodity falling under T.I. 68, CET. On 12th November, 1979, a refund claim was filed as the duty paid from 22-12-1977 to 18-7-1979 was not warranted under law.

The Assistant Collector, by his order dated 19-8-1980, held that scrap is necessarily something detached and the conclusion is that it should retain all the.characteristics of the original product from which it was detached, except physical form. From this angle, the scrap in question, is not scrap in the strict sense, as it does not retain the characteristics of the original product. Even according to the manufacturer, this scrap arises at different stages and at these stages, the product cannot be called the original raw material. It is, therefore, different from the original product and has to be treated as a manufactured product. It thus satisfies the test laid down by the Supreme Court and the recovery of duty was in order. He, therefore, rejected the refund claim. Before the Appellate Collector, the appellants pleaded that there was no manufacture within the meaning of Section 2(f) and also relied on order No. 513-B of 1980 dated 26-9-1980 (Cen-Cus November '80, page 681-D) where the Government of India held that scrap was not goods. The Appellate Collector found that the scrap in question is not the cut ends or unusable bits of the raw materials but are by-products and are bought and sold for use in brushes, etc.

He, therefore, agreed that they were liable to duty under T.I. 68 and rejected the appeal.

3. In the present appeal, it is contended that the wire drawn is only finer in size and there is some change in form, without any change in the basic characteristics. The Supreme Court had laid down that for purposes of manufacture, there should be a transformation into a new and different article having distinct name, character and use. None of these ingredients is satisfied in the present case. The Appellate Collector failed to appreciate that such broken bits are only called rejects/scraps/throwaways in the trade. His finding that the broken bits were obtainable during the process of manufacture more or less as by-products is quite erroneous. When wire drawing and coiling is not manufacture and the product is not subjected to duty, the broken pieces will also be outside the purview of excise; In Pio Food Packers (1980 ELT 343 SC), it was held that slicing and canning of pineapple cannot amount to manufacture. In Sandoz (India) Ltd. [1980 TLR 2332, Bombay] it was held that mere change in form or improving of quality does not amount to manufacture.'Similarly, processing of 330 Saccharin for conversion to 550 Saccharin was not held to be manufacture since the product remains Saccharin. It may be Correct that these broken parts are sold for several uses in brushes etc., but as Hon'ble Lentin J.observed : "any rubbish can be sold, but that is not the criterion. It cannot be said that the dross and skimmings are transformed resulting in new and different article with distinctive name, character and use so that they ordinarily come to the market to be bought and sold and are known to the market". In the present case, the broken bits are by no stretch of imagination a byproduct much less an end-product or a finished product. Regarding the filing of classification list and the consequent justification of recovery of duty, the filing of an erroneous list and payment of excess duty and receipt of the amount by the concerned authority, cannot elevate the receipt of such amounts to the dignity of a judicial or quasi-judicial order under which such amounts were paid (1980 ELT 563, Bombay). Further the base material has discharged its duty and any further levy on the thrown-out bits arising during processing will be against the authority of law.

4. Shri Gopal Prasad reiterated these contentions. He contended that mere processing cannot be equated with manufacture. In this case, there is no essential difference between the original and ultimate product and it cannot be said that the goods were not consumed (Pio Food-1983 ELT 443, Bombay). He also stated that there is no evidence to show a change in the characteristics as mentioned by the Appellate Collector, The invoices produced would show that the goods were sold as wire scrap. He relied on the decision of the Madras High Court (1981 ELT 233) where it was held that filaments continue to be tungsten and cannot be treated as parts of lamps since they need further processing.

5. The Departmental Representative Shri Kunhikrishnan stated that duty is being paid on the finished product. So, manufacture is not in dispute. In the case of brass scrap, it was held that it fell under Item 26-A [ELT 292 (Del.) -Khandelwal]. He added that according to the Mc-Graw Hill dictionary, the characteristics of the thicker wire are different from the thinner wire as the process of drawing, coiling, heating, etc. crystalises the tungsten and makes the filament brittle.

Shri Lakshmi Kumaran pointed out that the classification list shows that scrap occurs in coiling and it is, therefore, dutiable as in the case of the end product. In any case, even if the appeal is allowed, the claim for refund prior to 16-5-1979 will be time barred. In this connection, the decision in the case of IC & E Morten v. Supdt., Central Excise, Calcutta (1980 ELT 99) would be in the Appellants' favour. There, it was held that process waste cannot be equated with the finished product. In that case, parts of the products, namely, boiled sweets are held dutiable whereas the lumps arising during processing or 'process waste' are not taxable. However, defective or damaged, goods are not waste. {South Bihar Sugar Mills-1978 ELT 336).

The appellant has stated that scrap arises while drawing and while coiling and there was some force in the plea that it could be treated as process scrap but if there was any defective end-product, it could not be called scrap and treated as process waste, free of duty.

6. In reply, Shri Gopal Prasad pointed out that even according to the invoices goods were sold as wire scrap and filament scrap.

7. There is no dispute that the so-called scrap in this appeal is processing scrap which arises during the course of manufacture. We agree with Shri Lakshmi Kumaran that T.I. 68 being non-descriptive, there is some difficulty in equating the scrap with the end product.

The scrap in this case cannot, therefore, be treated as a 'manufactured' product falling under T.I. 68. We accordingly allow the appeal. However, in accordance with the provisions of Rule 11, we agree with the department and limit the consequential relief to six months from the date of payment. accordingly, modify the impugned order and partly allow this appeal.


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