1. As a common issue is involved in all the 8 appeals listed above, they were heard together and are being disposed of through this combined order.
2. The appeals listed at Sl. Nos. 2, 4 and 7 above are supplementary appeals. The Department at first filed only one consolidated appeal as the Order-in-Appeal passed in these cases was also a combined one. On being pointed out that a separate appeal would have to be filed for each of the Order-in-Original involved, the Department later filed the supplementary appeals and simultaneously prayed for condonation of the delay. During the hearing before us, both the respondents stated that in the circumstances of the case they had no objection to the delay being condoned. We condoned the delay in filing the supplementary appeals. Consideration of the appeals on merits was then taken up.
3. The appeals involve two main questions for our consideration. The substantive issue is whether broken glass, known in the local language as 'Bhagar' or as 'Bhatti-Se-Nikala-Hua Broken', is liable to central excise duty and, if so, under which item of the Tariff. The connected issue is whether, in case this material is held liable to duty, the demands for recovery of the past duty are partially hit by time bar or not. The Appellate Collector decided the substantive issue in favour of the respondents. He relied on the Bombay High Court judgment in the case of Indian Aluminium Company v. A.K. Bandyopadhyay (1980 E.L.T. 146 Bom.) in which the said High Court had held that dross and skimmings of aluminium were refuse, scum and rubbish and were not goods. The Appellate Collector held that broken glass was also a waste material, hence not goods and not excisable. The Department is in appeal before us against this order of the Appellate Collector, 4. During the hearing before us, the Department's Representative relied on the Tribunal's order in the case of Super Tyres (Pvt.) Ltd. v.Collector of Central Excise, Delhi reported at 1984 (3) E.T.R. 305 as well as on the other case law cited in the said order, including earlier orders of the Tribunal relating to bagasse, lump glass and saw dust. He sought to distinguish the case of broken glass from that of aluminium dross and skimmings saying that broken glass was a material of high value, it was known as glass, was regularly bought and sold and used for making glass bottles and other articles of inferior quality.
He stated that though the material was in the form of broken pieces, yet it was glass and the respondents as well as their customers described it so. It was different from the raw materials-silica sand, soda ash and other chemicals - from which it was made and hence it ought to be considered as a manufactured item which also satisfied the definition of 'goods' as laid down by the Supreme Court in D.C.M. and South Bihar Sugar Mills cases cited in the Tribunal's order in the case of M/s. Super Tyres aforesaid. Regarding the Tariff Item applicable, he stated that item 23-A(4), after its amendment on 1-3 1979, was specific for other glass and glassware and since the material was glass, it ought to be covered by this specific entry with effect from 1-3-1979.
Before that date, the residuary Item No. 68 of the Tariff would apply.
5. The first-mentioned respondents, M/s. Hindustan Scientific Glass & Fancy Glassware Works, stated in reply that broken glass arose in their factory in the course of manufacture of glassware, as such it was process scrap and not a manufactured article and hence not excisable.
The second respondents, M/s. Emkay Glass Works, stated that their plea in Appeal No. 685/83-D listed at Sl. No. 8 was that the material was not of their own manufacture but that the respondents had purchased it from others and hence it was trade goods for which no duty liability attached to the appellants. They stated that the Asstt. Collector had rejected this plea taken by them. The Appellate Collector, however, did not go into their plea at all as he had decided the matter in their favour on the substantive issue itself. In the other two appeals of the Department relating to their factory, their plea was that, as stated in the show cause notice, their material was an impure one as it was mixed with stones, coal, dust, etc. and further that the material came into existence in the furnace before glass was formed. They added that their customers had to remove the extraneous matter out of the material first before re-melting it for manufacture of rough glass articles: Their contention was that the material having arisen at a pre-glass stage and also being impure, could not be considered glass. Both the respondents pleaded that the material could not be considered a manufactured item nor as goods. They sought to distinguish the cases of bagasse and molasses decided earlier by the Tribunal saying that both bagasse and molasses were by-products whereas the broken glass was only a process scrap and not a by-product. They further sought to distinguish the case of lump glass saying that lump glass had a definite shape and size as compared to those of the broken glass. They added that the analogy of rubber scrap-the material which was the subject matter of consideration in the case of M/s. Super Tyres-also did not apply since further rubber products could be manufactured out of rubber scrap just by cutting or punching pieces out of rubber scrap while in the case of broken glass it had to be re-melted or re-cycled to make further glass articles.
Both the respondents relied on the Calcutta High Court judgment relating to confectionery in which, they claimed, it had been held that bits and pieces of the intermediate sugary material falling on the ground etc. in the course of manufacture could not be considered as confectionery. The first-mentioned respondents also slated that in case broken glass was held to be 'goods', it could be classified only under Item 68 as Item 23 A(4) was specific for glass or glassware and not for broken glass.
6. In a brief rejoinder, the Department's Representative stated that if the facts in Appeal No. 685/83-D were different as claimed by the respondents, M/s. Emkay Glass Works, the matter could be remanded to the Collector (Appeals) for looking into their plea that the material sought to be charged to duty in this case had been purchased by them from others.
7. In respect of the remaining cases, the Department's Representative stated that the distinction now sought to be drawn by the aforesaid respondents between broken glass on the one hand and impure glass and pre-glass on the other was not tenable. Even molten glass, when taken out of the furnace and subjected to further manufacture of glass articles, was liable to have some dust and dirt attached to it when portions of it fell on the ground. The respondents, M/s. Emkay Glass Works, had, throughout the proceedings, described the material as glass, though with the addition of adjectives like waste glass. As such, the material was basically glass only in the case of both the respondents and this was proved further from the fact that the material was used alike in both the cases, i.e., re-melted to manufacture glass articles. He stated that the Calcutta High Court judgment relating to broken pieces and bits of sweets was not a conclusive one as it had left the question open by saying that the Appellate Collector had arrived at his finding of fact without evidence.
8. Coming to the related issue of time bar, the Department's Representative conceded that since all the show cause notices in the present cases had been issued after 6-8-1977, the demands for duty made for the period prior to 5 years from the date of the respective show cause notices would not be sustainable. The remaining demands up to a period of 5 years were correctly issued since these were cases of suppression of facts by the respondents inasmuch as they had not filed any price list, classification list or declaration in respect of 'Bhagar' nor, if in doubt, had they made any enquiry from the Department regarding its dutiability. He admitted that the Proviso to rule 10 dealing with longer time limit of 5 years on account of suppression of facts etc. had not been cited in the show cause notices nor had it been alleged therein that the facts of the case attracted the longer time limit. But he pleaded that the allegation of suppression of facts could be inferred from the dates of events narrated in the show cause notices. The respondents argued that since no facts making out any case of suppression had been disclosed in the show cause notices nor had the Proviso to rule 10 been specifically invoked, only the normal time limit of six months could apply. They added that the Assistant Collector had, no doubt, held in his order that the respondents were guilty of suppression and attributed mala fides to the respondents but yet he had not imposed any penalty on them. This also belied the charge of suppression or mala fides, according to the respondents.
9. We have carefully considered the matter. We agree with the Department's Representative that the distinction sought to be drawn belatedly by M/s. Emkay Glass Works between broken glass, pre-glass and impure glass is not convincing. The material was scrap glass or 'Bhagar' in both the cases and was used or re-cycled as such.
10. Regarding the substantive issue, whether 'Bhagar' could be considered as a manufactured item and as goods, we observe that the ratio of our earlier order in the case of rubber scrap of M/s. Super Tyres applies squarely. That order of this Bench was based chiefly on the authority of the Supreme Court judgments in the cases of D.C.M. and South Bihar Sugar Mills and on the Allahabad High Court judgment in the case of M/s. Oudh Sugar Mills. Applying the said ratio, we find that 'Bhagar' is different from its raw materials, namely, silica sand, soda ash and chemicals. Labour and energy have been employed in bringing about the transformation from raw materials to 'Bhagar' or glass. Among the persons dealing in it, it is known and described as" broken, broken glass, waste glass, etc. There is thus no doubt, that it is basically glass. Therefore, it has to be considered as a manufactured item. It is regularly bought and sold and it fetches considerable value. It, therefore, satisfies the definition of goods as laid down by the Supreme Court in the aforesaid cases. No authority has been brought to our notice according to which only the goods intended to be manufactured could be taxed and not the by-products or the residuary products arising in the course of manufacture. On the contrary, we have it on the authority of the Allahabad High Court judgment in the case of M/s. Oudh Sugar Mills that by-products and residual goods are also liable to duty. In our order in the case of M/s. Super Tyres we have given five examples of goods which are in the nature of byproducts and residual products but which have been taxed specifically in the Central Excise Tariff. The case of 'Bhagar' can, therefore, be no different.
The Appellate Collector went wrong in applying the analogy of Bombay High Court judgment on aluminium dross and skimmings because 'Bhagar' is a material of considerable value and there is quite a large-scale trading in it. It may be that it is not a pure enough material for the use of the respondents who make scientific glassware and fancy glassware. But other manufacturers of glassware find it quite useful and use it as a substitute for the primary raw materials liks silica sand, soda ash and chemicals. We find from the show cause notices that the value of 'Bhagar' sold by the respondents ranged from Rs. 15 lakhs to Rs. 25 lakhs per annum. A material having such good value and use can by no stretch of imagination be considered scum, refuse or rubbish.
We, therefore, hold that 'Bhagar' or broken glass is excisable goods.
The respondents pleaded before us that wherever the Parliament intended to tax industrial scraps, it had done so by including specific items or sub-items to that effect in the Tariff and since this was not done in the case of scrap glass, it ought not to be taxed. We do not agree with their plea. So long as 'Bhagar' is a manufactured item and satisfies the definition of 'goods', it has to be considered taxable. If there is no specific item for any scrap goods in the tariff, the residuary item No. 68 would take care of the situation. Accordingly, we hold that till 28-2-1979, 'Bhagar' was classifiable under Item 68. With effect from 1-3-1979, with the incorporation of the Word 'Glass' in item 23-A(4), this item became specific to cover any material which was in the nature of glass but was not a manufactured article of glass. With effect from 1-3-1979, therefore, 'Bhagar' is classifiable under Item 23-A(4). On the substantive issue we, therefore, agree with the Department.
11. As regards the time bar, we agree with the respondents that since after 6-8-1977 the time limit applicable under rule 9(2) was the same as in rule 10 and that since the longer time limit of 5 years had not been invoked in the show cause notices nor any facts disclosed from which a case of suppression could be made out, only the normal time limit of six months was available to the Department for past recoveries. Regarding Appeal No. 685/83-D, we agree that the matter would have to be remanded to the Collector (Appeals) for going into the respondents' plea that the material involved in that case was trade goods and not of their own manufacture.
12. In the result, in the case of Appeals listed at Sl. Nos. 1 to 4, 6 and 7, we set aside the impugned Orders-in-Appeal, restore the orders of the Assistant Collector to the extent that they held 'Bhagar' as a dutiable material, and we further order that the demands for duty shall be restricted to the normal time limit of six months and will be under Item 68 for the period before 1-3-1979 and under Item 23-A(4) for the period on and from 1-3-1979. The matter in Appeal No. 685/83-D listed at Sl. No. 8 is remanded to the Collector (Appeals) for a fresh decision in the light of the respondents' plea that the material involved in that case had not been manufactured by them but had been purchased from others. In the Cross Objection listed at Sl. No. 5, the respondents sought no further relief but merely opposed the Department's appeal. In view of our orders on the appeals, the Cross Objection is dismissed.