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PETITIONER: TATA IRON & STEEL CO. LTD.

       Vs.

RESPONDENT: C.C.E.

DATE OF JUDGMENT16/12/1994

BENCH: SAHAI, R.M. (J) BENCH: SAHAI, R.M. (J) PARIPOORNAN, K.S.(J)

CITATION:  1995 SCC  (1) 323        JT 1995 (1)   172  1994 SCALE  (5)301

ACT:

HEADNOTE:

JUDGMENT: The Judgment of the Court was delivered by R.M.   SAHAI,   J.-  The  only  dispute  that   arises   for consideration in these appeals directed against the order of Central  Excise  and Gold (Control)  Appellate  Tribunal  is whether  scrap  obtained  by  the  appellant  in  course  of manufacture  of  iron  and  steel  and  steel  products  was dutiable under Item 26 or Item 26-AA of the Tariff Schedule. 2.Since facts are not in dispute, and the duty is sought  to be  levied on scrap obtained by the appellant in  course  of manufacture of iron and steel products and supplied by it to M/s Tata Yodogawa Ltd. on payment of duty for conversion  of scrap  into ingots after re-melting which was  actually  re- melted  and  re-used  by  the  appellant  as  ingot,  it  is appropriate  to  extract the two entries relating  to  steel ingots and iron or steel products:  "26.   Steel Ingots including SteelRs 100 per metric         Melting Scrap                            tonne.  26-AA. Iron or steel products,the    Rs Three hundred and         following namely:             fifty per metric tonne +  From  the Judgment and Order dated  24/27-2-1986  of  the Central  Excise  (Customs)  and  Gold  (Control)   Appellate Tribunal,  New Delhi in A. No. E.B./SB/T/142/76-B & 1844  of 1985-B 324               (i)   Semi-finished steel              including blooms, billets,              slabs, sheet bars, tin bars              and hoe bars.              (ii)--(v) *           *              * Item 26 levies duty on raw material.  In commercial parlance steel  ingots  are used for producing steel  products.   Raw melting  scrap  serves the same purpose.  Item  26-AA  deals with  iron and steel products.  What are those  products  is mentioned in clauses (i) to (v) of the item.  These  appeals are  concerned with the scope of clause (i).  It deals  with

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semi-finished  steel.  A semi-finished product is one  which requires   some   further  work  or  treatment   to   become serviceable.  But it cannot apply to scrap as it is normally understood as something which is not serviceable.  Even  the Tribunal  held  that scrap produced by  appellant  "did  not strictly answer to the description but they can resemble  or closely  resemble them, qualifying to be called  substandard blooms  or  slabs or bars or channels".  But  a  substandard article is not scrap as understood in commercial parlance or trade  circle.  Two reasons have been given by the  Tribunal for  including scrap of iron and steel in Item 26-AA   one, price  circular  issued  by Controller  of  Iron  and  Steel classifying  scrap into industrial, re-rolling  and  melting scrap and fixing different rates for each and other the size of scrap.  The Tribunal held that even though scrap sold  by the  appellant  to  M/s Tata Yodogawa  Ltd.  was  melted  to produce  ingots  but  that  was  not  determinative  of  its character  as what was melted was not melting scrap  because of  its size, therefore, it did not attract levy under  Item 26  but  under Item 26-AA being something  like  substandard goods. 3.   When  the  matter was pending in appeal  the  Assistant Collector  of Central Excise wrote a letter to the  Director of Inspection (Metallurgical), Jamshedpur, requesting him to give his views whether the scrap sold by the appellant under agreement  to  different  parties  for  manufacturing  steel ingots  out  of the scrap could be described  as  re-melting scrap as the Department on examining the invoices found that maximum length of such scrap of various products like rails, billets, plates, lee, channels, angles, beams etc. were only up to 1.5 metres and such scrap, according to Iron and Steel Controller’s specification of 1959, could not be  classified as  re-melting  scrap.   This  letter  was  replied  by  the Director  and it was mentioned that from the letter sent  by the  Assistant  Collector  it appeared  that  the  size  and dimension  of the scrap was taken as the sole yardstick  for classification   and,  "if  that  be  the  case   then   the classification of scraps solely on the basis of size  factor can  hardly be considered a very  rational  classification". The  Director  further was of the opinion  that  "the  steel manufacturing operations generate scrap which is in turn re- used not only in the steel-making process but also in  plant furnaces and cupolas.  This scrap is called process scrap or ’arisings’  of  steel mills.  Cuttings  of  rails,  billets, plates,  axles, channels etc. supplied to M/s Tata  Yodogawa Ltd. are ’arisings’ of TISCO’s mills.  These scraps (process scrap)  are usually treated as melting scraps  in  developed countries as well as in 325 India.  There are different grades of melting scrap  heavy, medium and light".  He further observed that the  technology has  changed  and in view of the developments  in  iron  and steel  industry  the size factor could not  always  be  main criterion for the classification of steel scraps. 4.   Although  this  letter is not relevant but it  goes  to demonstrate  that  size of the scrap  is  not  determinative whether  it was melting scrap or not.  ’Scrap’ according  to dictionary   means  "a  small  piece  cut  or  broken   from something;  fragment".   In commercial parlance  ’scrap’  is normally understood as ’waste’.  But it may be used for  re- rolling  or re-melting for bringing out raw material  to  be used  for  producing finished products.  Under  Entry  26-AA what  is exigible to duty is semi-finished  steel  including blooms,  billets, slabs, sheet bars etc.  Semi-finished  may mean  between  raw material and finished products.   But  it

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cannot be described as scrap.  A substandard bloom or billet is steel bloom or billet.  But the scrap of billet or  bloom would  not be the same thing as semi-finished  product.   In the  commercial  sense,  scrap  and  semi-finished  products cannot be understood in the same sense.  The attempt of  the Department, therefore, to levy duty on scrap under Item  26- AA was not correct. 5.   Melting scrap is defined as:               "Scrap  which  cannot be used  for  any  other               purposes  but can be charged into furnace  for               melting   should  be  classified  as   melting               scrap." The  Tribunal held that since the appellant did not  dispute that the scrap produced by the appellant could be industrial scrap, the scrap produced by it could not be taken to be re- melting scrap.  Item 26 purports to levy duty on  re-melting scrap.  The Tribunal having found that the scrap produced by the  appellant  was  remelted the products  cleared  by  the appellant satisfied the test of being re-melting scrap. 6.   Neither  reason  given  by  the  Tribunal,   therefore, appears  to be sound.  Price fixation by Controller of  Iron and  Steel  could  not furnish basis  for  interpreting  the entry,  for levying duty under the Central Excises and  Salt Act,  1944.   The  Controller might  have  classified  scrap depending  on  size and terming it as rolling,  melting  and industrial  scrap  but  that could not render  it  as  semi- finished steel products.  Size of scrap may be relevant  for fixation of price but it could not reflect on the nature  of scrap. 7.   In  the result, the appeals are allowed and  the  order passed  by the Tribunal is set aside.  The question  of  law raised by the appellant is decided by saying that the  scrap cleared by the appellant in each year having been melted and re-used  as iron ingot was re-melting scrap  dutiable  under Item 26 of the Tariff Schedule. 8.   The appellant shall be entitled to its costs. 327