ORDER
S.S. Sekhon, Member (T)
1. We have heard both sides
and considered the submissions and find –
(a) The Appellants are inter alia engaged in procuring ferrous scrap in loose conditions from various manufacturers on payment of appropriate Central Excise Duty. Thereafter, the said scrap is brought to the Appellants premises and after removing the impurities the same is compressed with the aid of mechanical presses and formed into bales and removed on sale basis.
(b) They approached the Central Excise Authorities for granting a Registration certificate as a manufacturer & dealers as they were informed that the processes carried out by them amounting to manufacture and directed levy under Central Excise Act, 1944.
(c) Accordingly they filed an application on 8-6-1994 and obtained registration on dated 20-7-1994 which covers manufacturing and wholesale trading of their above said activity. They filed a classification list which was approved on 24-7-1994 and declaration under Rule 57G was filed on 21-7-1994 which was acknowledged on 22-7-1994. Thereafter they filed RT 12 return every month, which were approved by the Jurisdictional Range Officer.
(d) A Show Cause Notice dated 25-2-1995 was issued directing them to show cause why the declaration under Rule 57G dated 21-7-1994 should not be rejected on the ground that the processes carried out by the appellants did not appear to amount to manufacture in terms of Section 2(f) of the Central Excise Act, 1944. A reply to the said notice was sent.
(e) No order with reference to the aforesaid Show Cause Notice dated 23-2-1995 was received; however, another Notice dated 7-4-1995 was received; which required the appellant to show cause as to why an amount of Rs. 17,07,011.20 should not be recovered under Rule 57-1 for the period from October 1994 to March 1995. A reply to this notice was sent. Another Show Cause Notice was issued on 7-4-1995 requiring the appellants to show cause why the registration under Rule 174 should not be cancelled which was also replied.
(f) By another Show Cause Notice dated 11-7-1995, the Appellants were required to show cause why the amount of Rs. 6,37,863/- should not be recovered under Rule 57-I for the period from April 1995 to June 1995 on the ground that the processes carried out by them on this scrap purchased on payment of duty did not amount to manufacture. The reply was sent to this notice also.
(g) All these Show Cause Notices were heard by the Assistant Collector on 12-10-1995 and an order dated 12-10-1995 was passed holding :-
(i) The Appellants should forthwith surrender the Central Excise Registration No. 020408030 issued to the Appellants by the Superintendent of Central Excise, Range-VII, Dn. F-II, Mumbai-I on the ground that the process carried out by the Appellants does not amount to manufacture as contemplated in Section 2(f) of the said Act.
(ii) The Modvat declaration filed by the Appellants was rejected under Rule 57G of the said Rules as the Appellants are not eligible to hold Central Excise Registration and avail Modvat Credit for the reasons stated in (a) here-in-above. (iii) The 2 Show-cause-cum-demand notices totally amounting to Rs. 23,44,874/- (Rupees Twenty three lakhs forty four thousand eight hundred seventy four only) were confirmed as per the provisions of Rule 57-I of the said Rules.
(h) Being agrieved, the appellants took up the matter before Commissioner (Appeals) where they also made an alternative prayer that if the amount of duty paid on the final product by them were not required to be paid as the activity did not amount to manufacture. The said shall liable to refunded to them in Section 11B. Rejected the appeal and held that the order dated 12-12-1995 of the Assistant Collector did not called for any interference.
(i) The present appeal is against the above said order of the Commissioner (Appeals).
(j) As regards the ground taken up in the appeal before us that the Commissioner has erred in holding that the processes carried out by the Appellants after the purchase of this scrap from the registered manufacturers is not a manufacturing operation. We find that the appellants has submitted that he is carrying out removal of impurity in the scrap purchase by them which though negligible has to be carried out since the said scrap can not be used for refining so as to make ingots/billets or casting and after removal of impurity, the emergent product should be known to the persons dealing unit with a different name, characteristics and use. No material has been placed before us to conclude how a new commercial identifiable product emerges. The Apex Court in the case of Laminated Packaging (P) Ltd. – 1990 (49) E.L.T. 326 (S.C.) has held –
“6. The further contention urged on behalf of the appellant that the goods belong to the same entry is also not relevant because even if the goods belong to the same entry, the goods are different identifiable goods, known as such in the market. If that is so, the manufacture occurs, and if manufacture takes place, it is dutiable. Therefore, we do not find any reason to uphold the following finding of the original authority –
“In the present case the assessee is bring (sic) to waste and scrap of ferrous alloy steel falling under sub-heading No. 7204.30 of the Schedule to Central Excise Tariff Act, 1985 and after belong the same they are closing the same to their customer which is falling under the same sub-heading despite the fact they filed the classification of the baled scrap under sub-heading No. 7204.30 of the schedule to Central Excise Tariff Act, 1985. Also the process carried out by the assessee is only sorting, processing and stuffing which cannot be called as process of manufacture or contemplated under Section 2(0 of Central Excise & Salt Act, 1944. Therefore, the assessee has erroneously obtained Central Excise Registration …..”
There is no finding arrived that different identifiable goods do not emerge. “The finding of sub-heading remaining the same did not met the approval of the Apex Court and can not therefore be a cause to deny manufacture taking place under Central Excise Law.” The other findings on the process undertaken & the technology employed by the assessee does not conform to be called as a process of manufacture contemplated under Section 2(f) of the Central Excise Act, 1944 does not meet the requirement of the law laid down by the Apex Court in the case of Indian Aluminium Cables Ltd. [1985 (21) E.L.T. 3 (S.C.)] where the court held –
“13. To sum up the true position, the process of manufacture of a product and the end use to which it is fact, cannot necessarily be determinative of the classification of the product under the fixed schedule …..”
Therefore, the process or technology employed is not the criteria but the result of such an employment and emergence of a new product would be the relevant criteria to determine whether ‘exigible manufacture’ attracting levy of Central Excise Duty once again is occasioned or not. The finding in the Commissioner (Appeals) order.
“….. the scrap even after baling remains ‘scrap’ only and liable to
duty under the same Chapter Heading. No chemical transformation takes place. No distinct goods emerge from such baling of scrap. The scrap remains scrap and used as scrap only. Therefore, the baling of loose scrap cannot be considered as manufacture”
have been arrived at, without any material on record and based on his understanding cannot be accepted to question & disturb the findings arrived on by the Assistant Commissioner, who approved the CL by findings & accepting them levy of Central Excise Duty once again. This approval has not be challenged. It is not found to be alleged not legal and proper by the authorities competent to review such orders of the Assistant Commissioner. We find therefore, to call for disturbing the approval of CL by the Assistant Commissioner by these subsequent proceedings with out following the route of Review, as prescribed by law, not to be permissible.
(k) Following the decision of the Larger Bench in the case of Commissioner of Central Excise, Rajkot v. Ashok Iron & Steel Fabricators [2002 (140) E.L.T. 277 (Tribunal-LB = 2002 (100) ECR 431 (Tribunal-LB)] wherein it was held “Credit availed & already utilized before the final/finished product looses its dutiable character is not reversible. We cannot find any reason to uphold the denial of credit availed, even if subsequently it is found & upheld that the ‘find baled scrap’ was not dutiable.
(1) The appellants have paid amounts as duties, in excess of the credit availed. They were in any case eligible to issue credit eligible invoices as dealers. Therefore we find no evasion by availing credit in this case.
2. In view of our finding, we find no reason to uphold the orders of the lower authorities the same are set aside & appeal is allowed.