1. Question for decision in this appeal is whether in the case of the appellants who are permitted to follow rule 56A of Central Excise Rules, 1944 (for short the rules) procedure demand of duty for the period 1-11-80 to 28-2-81 on waste recycled as raw material for manufacture of Aluminium Extruded shapes and sections is justified.
2. The Assistant Collector and Collector of Central Excise (Appeals) held that such recycling of waste was removal for the purpose of Rule 56A (3) (iv). The Collector (Appeals) for the period upheld the demand.
3. Shri V. N. Deshpande, learned advocate for the appellants argued that rules 9 and 49 of (he Rules providing for intermediate goods being deemed to have been removed on being consumed or utilised in the factory was not applicable in the case of a manufacturer following rule 56A procedure. He also argued that before 1-3-1981 scrap and waste were not included in Tariff Item 27-Aluminium and sub-item (aa) (waste and scrap) came in the tariff only on 1-3-1981. Demand was therefore not justified.
4. Shri V. Laxtni Kumaran, SDR for the respondent stated that for the appeal and sake of argument he would concede that rules 9 and 49 would not be applicable in case of a manufacturer following Rule 56A procedure but he argued that this did not affect the excisability of waste and scrap which incurred this liability as soon as they arose in the process of manufacture of finished product Aluminium Extrusions. He also argued before 1-3-1981, Item 27 had the description Aluminium in any crude form which would include waste and scrap. The subsequent mention of 'waste and scrap' as a specific item only restated the obvious and did not alter the legal position in any way.
5. A reading of order of Collector (Appeals) and Assistant Collector shows that they upheld the demand because they found that goods were "waste" and because they were recycled in the factory, they were removed from factory within the meaning of rule 56A (3) (iv) of Rules.
Apart from concession of Shri Laxmi Kumaran which we have mentioned above newly added explanation in Rules 9 and 49 and on 20-2-1982 with retrospective effect from 1944 providing for intermediate goods being deemed to have been removed on being consumed or utilised in the factory, are themselves clear that these explanations are for the purposes of Rules 9 and 49 only. They cannot be used to interpret the meaning of word " removed" used in rule 56A (3) (iv) (a) of the Rules.
6. We do not agree with the reasoning of the Collector (Appeals) that because Notification 34/81, dated 1-3-8! exempted scrap and waste, earlier they must have been chargeable to duty. This need not necessarily and invariably be so.
7. As to Shri Laxmi Kumaran's argument that scrap and waste became liable to duty as soon as they arose during process of manufacture, it is sufficient to say that this was not the reasoning of Collector (Appeals) and Assistant Collector. They proceeded on the basis that recycling of waste was removal for rule 56A (3) (iv). Besides, even if goods be held scrap and waste (and not only waste), it is well to remember that these even according to Shri Laxmi Kumaran at the material time were Aiuminium in crude form. They were produced from duty paid Aluminium ingots, billets and scrap which according to Shri Laxmi Kumaran would be Aluminium in crude form. Thus from Aluminium in crude form what arose was Aluminium in crude form. This can hardly be called "manufacture".
8. As a result of aforesaid discussion we find that lower authorities were in error in holding that recycling of the waste as a raw material for the same end product in the same factory amounted to removal within the meaning of rule 56A (3) (iv) (a) or for the purpose relying on newly added explanations to rules 9 and 49. This provision as to waste could only be attracted when there was removal from the factory in accordance with the provision of rule 56A.