2006(07)LCX0012

IN THE SUPREME COURT OF INDIA

Ashok Bhan and Markandey Katju, JJ.

Jai Raj Ispat Ltd.

Versus

Commissioner of Central Excise, Hyderabad-IV

Civil Appeal No. 5887 of 2005, decided on 20-7-2006

Cases Quoted -

DEPARTMENTAL CLARIFICATION CITED
C.B.E. & C. Circular No. 27/89, dated 21-9-1989 [Paras 8,9]

[Order]. -

The point which falls for determination in this case is whether the mis-rolls arising during the process of manufacture CTD bars would fall under tariff entry 72.04 or 72.07.


2. Appellant had been classifying the mis-rolls under tariff entry 72.07 but after the issuance of the Notification No. 49/97-C.E., dated 1st August, 1997 exempting the waste and scrap arising in the course of production or manufacture of hot re-rolled products from the whole of excise duty, appellant started classifying the mis-rolls under tariff entry 72.04.


3. The assessing authority did not accept the classification of mis-rolls under tariff entry 72.04 and accordingly issued a show cause notice dated 3-3-1998 demanding differential duty during the relevant period and penalty under Rule 173Q of the Central Excise Rules, 1944 (for short 'the Rules). Further Interest was demanded under Section 11AB of the Central Excise Act, 1944 (for short 'the Act').


4. The adjudicating authority confirmed the demand of differential duty as per show cause notice. Penalty of Rs. 15,000/- as well as interest was also confirmed.


5. Aggrieved against the aforesaid order, the appellant filed appeal which was dismissed by the Commissioner (Appeals).


6. Being further aggrieved, the appellant filed an appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench at Bangalore (for short 'the Tribunal). Tribunal held that the mis-rolls arising during the manufacture of CTD bars would not fall under tariff entry 72.04 and the same would fall under 72.07. Demand of differential duty was confirmed. However, the interest and penalty were waived off.


7. Being aggrieved, the appellant has come up in appeal before us. Tribunal in the course of its judgment has recorded the following finding :

"5. We have gone through the rival contentions. The case of the appellants is that the 'mis-rolls' should be considered as waste and scrap and given benefit of exemption Notification No. 49/97-C.E. However, the Revenue contends that 'mis-rolls' are semi finished products. The 'mis-rolls' emerge
during the process of manufacture of rods and bars. When the in gots/pieces of billets are re-rolled, the 'mis-rolled' get ejected out of the rolling mill due to mechanical problems. These 'mis-rolls' are cleared to other small rolling mills even as per the appellant's admission. The adjudicating authority has relied on the Boards Circular No. 27/89, dated 21-9-89 wherein it has been clarified that the heading No. 7204 would not cover an article which could be converted into another article by hot rolling without it being necessary to re-melt the metal first. In other words, according to the Board's clarification, the heading No. 7204 would cover only such waste used for re-melting not cover re-rollable scrap and such waste and scrap which are not for re-melting would be classifiable in other appropriate heading of the tariff. Since the 'mis-roll' is a solid section in semi finished form and is used directly for re-rolling in smaller hot re-rolling mills, the adjudicating authority had arrived at the classification heading No. 7207.90 which pertains to semi finished products. We do not find any flaw in the reasoning of the adjudicating authority. It is not disputed that the appellants themselves classified the item under heading 7207.90. In view of the clear findings of the Commissioner, we uphold the classification of the 'mis-rolls' as heading No". 7207.90"


8. We agree with this finding of the Tribunal. The following Circular issued by the Board also re-enforce our view :

"Iron and Steel waste and scrap - Heading 72.04 would not cover an article which could be converted into another article by hot rolling without it being necessary to remit the metal first. The Board, therefore concluded that Heading No. 72.04 read with Note 6(00a)to Section XV and HSN Explanatory Notes at pages 987-988 would cover only such waste and scrap as would generally be used for remelting and consequently would not cover re-rollable scrap. Such waste and scrap which is not for re-melting will have to be classified in the other appropriate headings of the tariff. The instructions contained in para 2 of Board's Circular No. 276/88, may be considered as modified accordingly."


9. As per this Circular the articles which could be converted into another articles by hot rolling without re-melting would not fall under heading 72.04. The waste and scrap which is not for remelting will have to be classified in the other appropriate headings of the tariff. This Circular is in consonance with the findings recorded by the Tribunal in the present case.


10. For the reasons stated above, we do not find any merit in this appeal and dismiss the same with no order as to costs.

Equivalent 2006 (200) ELT 0518 (S.C.)

Equivalent 2006 (076) RLT 0001 (SC)