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Kolhapur Steel Ltd. Vs. Collector of Central Excise - Court Judgment

LegalCrystal Citation
CourtCustoms Excise and Service Tax Appellate Tribunal CESTAT Mumbai
Decided On
Reported in(1983)(14)ELT1947Tri(Mum.)bai
AppellantKolhapur Steel Ltd.
RespondentCollector of Central Excise
Excerpt:
.....has explained how the skull scrap, runners and risers etc. arise out of the manufacture of steel ingots in the factory of the appellants. he has stated that the scrap thus produced is utilised again and again in the manufacture of steel ingots and this practice had been going on for the past several years. the main contention advanced by the appellants is that since the scrap is produced from scrap only and since both the types of scrap are classifiable under the same item namely, 26 of the central excise tariff, there is no manufacture in terms of sec. 2(f) and therefore cannot be any levy of duty on the scrap in question. in support of this contention, the consultant has referred to several judicial pronouncements and also the decisions of the departmental authorities.another.....
Judgment:
1. This is an appeal under Section 35-B of the Central Excises and Salt Act, 1944, filed by the Kolhapur Steel Ltd., against the Order No.V(26)15-112/ADJ/81/354 dated 22-9-82 of the Collector of Central Excise, Pune, ordering levy of duty amounting to Rs. 78,685.00/- (Basic) and Rs. 47.122.25/- (Special) on 1939.100 M.T. of scrap, runners and risers alleged to have been cleared clandestine during the period 9-4-79 to 4-6-81 and levying penalty of Rs. 5,000/- on the appellants under Rule 173Q of the Central Excise Rules, 1944 for being involved in the aforesaid offence. Consultant, Shri N.D. Khosla, who appeared for the appellants has explained how the skull scrap, runners and risers etc. arise out of the manufacture of steel ingots in the factory of the appellants. He has stated that the scrap thus produced is utilised again and again in the manufacture of steel ingots and this practice had been going on for the past several years. The main contention advanced by the appellants is that since the scrap is produced from scrap only and since both the types of scrap are classifiable under the same item namely, 26 of the Central Excise Tariff, there is no manufacture in terms of Sec. 2(f) and therefore cannot be any levy of duty on the scrap in question. In support of this contention, the consultant has referred to several judicial pronouncements and also the decisions of the departmental authorities.

Another argument advanced by the consultant is that the steel scrap in question is an intermediate produce in the course of production of steel ingots and this is not chargeable to duty accordingly. In support of this contention also, the consultant has relied on judicial and departmental decisions. The third point taken by him is that the appellants had declared the scrap in the classification list and therefore, the department was wrong in invoking Sec. 11-A proviso and demanding duty for the past five years. He has further explained that the appellants had made a correct declaration and their factory had been visited by several Central Excise Officers and there was no suppression of any fact on the part of the appellant and hence at the most duty could be demanded only for a limited period of 6 months from the date of issue of notice and not for the whole period. In support of his contention, he has filed two orders of the Collector of Central Excise (Appeals) and requested us to take the same on record. He has also relied on the trade notices of the Collectors and the Board's instructions as mentioned in the written memo of appeal. He has finally submitted that there has been non-application of mind on the part of the Collector and hence his order is therefore liable to be set aside.

He has also explained that the quantity of scrap arrived at was obtained by the Central Excise Officers from the Form IV Register of the appellants and this would also show that there was no suppression of facts by them. He has further pleaded that Form IV was a statutory record and this was required to be maintained as per the Central Excise Rules. As regards the Collectors' order of levy of penalty, he has pointed out that there was no contravention of Rule 9 or any other rules ; therefore, Rule 173-Q was not attracted. He has also relied on judicial pronouncements in this behalf to say that the levy of penalty was not justified. He has accordingly requested for setting aside the Collectors' order in allowing the appeal.

2. The Departmental Representative has pointed out that the skull scrap, runners, risers, etc. fall under item 26, C.E.T. As per notification No. 16/79 dated 20-1-79, exemption was granted to skull scrap from that date. This exemption was available only when the scrap arose out of the manufacture of steel ingots. This Notification was amended by the Notification No. 24/81, dated 5-6-81 in which the scrap arising out of the manufacture of steel castings was also exempted.

There was no retrospective effect to the Notification dt. 5-6-81 and hence the Collectors' order demanding levy of duty was justified.

Accordingly, he has prayed that the appeal be dismissed.

3. We have examined the submissions of the appellants and the respondent. We find that the whole issue relates to levy of duty on 1939.100 M.T. of scrap which arose out of the production of steel ingots and castings by the appellants. There is no doubt that the appellants obtain steel scrap for the production of ingots. This has not been denied by the department. Therefore when steel scrap is melted and cast into ingots and other forms in the appellants factory, the quantity of steel scrap being generated is unavoidable, It is on this quantity that the Collector has sought to charge duty under his order-in-appeal. So far as this scrap is concerned, it is seen that it is produced out of scrap. It is not the contention of the department that the original scrap is non-duty paid and therefore, duty should be charged on the fresh scrap which arises in the production of steel ingots and castings. Therefore, so far as the fresh melting scrap is concerned, it is seen that the classification is under 26, C.E.T. which is the same as the classification of the old scrap from which it was manufactured. Therefore, there has not been a production of our new article satisfying the definition of 'manufacture* as per Sec. 2(f). In this view, there cannot be any levy of duty on this scrap as contended by the appellants. Since no duty is leviable, the Collectors, order for levying of duty and penalty is not correct. Therefore, it is not necessary for us to go into the other submissions of the appellants. We accordingly set aside the Collectors' order dt. 22-9-82 and allow the appeal.


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