Tata Iron & Steel Co. Ltd. Vs.
C.C.E  INSC 698 (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
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.
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 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
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.
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
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.
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.
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.
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
appellant shall be entitled to its costs.