Tata Iron & Steel Co. Ltd. Vs.
Collector of Central Excise  INSC 693 (16 December 1994)
SAHAI, R.M. (J) SAHAI, R.M. (J) PARIPOORNAN,
CITATION: 1995 SCC (1) 323 JT 1995 (1) 172
1994 SCALE (5)301
R.M. SAHAI, J.
only dispute that arises for consideration in these appeals directed against
the Order of Central Excise & Gold (Control) Appellate Tribunal is whether
scrap obtained by the appellant in course of manufacture of iron and steel and
steel 173 products was dutiable under Item 26 or 26AA of the Tariff Schedule.
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 - Rs. 100
per Steel Melting Scrap. metric tonne." "26AA.- Iron or steel
products, the following namely:- (i) Semi-finished Rs. Three hund- steel
including red and fifty blooms, billets, per metric slabs, sheet tome bars, tin
bars and hoe bars.
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 26AA 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 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 sub-standard 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 26AA one,
price circular issued by Controller of Iron and Steel classifying scrap into
industrial, re-rolling and melting scrap and fixing different rate 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 26AA being something like sub-standard goods.
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 upto 1.5
meters and such scraps, 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 174 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 reused 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) arc usually treated as melting scraps in developed countries as wIl as
in 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.
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 bro.ken from something; fragment'. In
commercial parlance 'scrap' is normally understood as 'wast'. 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 26AA 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 cannot be
described as scrap. A sub-standard 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 26AA was not correct.
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
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.
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 Excise & 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.
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 175 year having been melted and
re-used as iron ingot was remelting scrap dutiable under Item 26 of the Tariff
appellant shall be entitled to its costs.