ORDER
C.N.B. Nair, Member (T)
1. This is a reference from the Division Bench. The issue for consideration has been stated in Para 5 of the referral order (Misc. Order No. 114/2001-B) [2002 (140) E.L.T. 161 (T)] as under :-
“5. We have considered the submissions. The question before us is whether the respondents’ products made from re-rollable scrap and cleared during the period of dispute were exempt from duty under the cited Notifications. It appears that ‘waste and scrap’ of iron and steel, within the coverage of which the appellant seeks to put the assessee’s re-rollable scrap, was falling under CET Heading 72.03 during an earlier part of the period of dispute and was under Heading 72.04 for the rest of the period. The Board’s circular has held that Heading 72.04 would cover only such waste and scrap as would generally be used for re-melting and consequently would not cover re-rollable scrap and, further that denial of the benefit of exemption under Notification No. 202/88-C.E. on the ground that re-rollable scrap is “waste and scrap” falling under Heading 72.04 is not correct. The Bench has held in J.S W.
Iron & Steel Industries case that the Board’s circular is binding on the departmental authorities and has to be given effect to. In Adarsh Steel Re-rolling Mills case, another Bench held that the benefit of Notification No. 208/83-C.E. was not available to that part “as waste and scrap falling under 72.03 was not specified as an input in Serial No. 2 of the Table annexed to the Notification”. Whether the scrap used by M/s. Adarsh Steel “Re-rolling” Mills in that case was re-reliable scrap or not is not explicit in the text of the order. Presumably, it was re-rollable scrap only. In Shreeram Steel Industries case, the same Bench held that re-rollable scrap was not specified as an input in the Table annexed to Notification No. 202/88-C.E. and hence the benefit of exemption under the Notification would not be available to the final products made from such scrap. Thus there appears to be a conflict of views (on the issue before us) between coordinate Benches of the Tribunal. Registry is, therefore, directed to place the matter before the Hon’ble President for constituting a Larger Bench to settle the issue”.
2. The history of the dispute leading to the reference may be stated first. M/s. Adarsh Steel Re-rolling Mills is a manufacturer of iron and steel products which are liable to Central Excise duty under Chapter 72 of the Central Excise Tariff. In respect of the goods produced by them, they availed exemption from Central Excise duty in terms of Notification Nos. 208/83, 90/88 and 202/88. Show cause notices were issued by the jurisdictional Supdt. of Central Excise alleging that the appellants were not eligible for the exemption and duty short levied is required to be recovered for the period 1987 to 1990. When the matter came up for adjudication before the Assistant Collector, the assessee submitted that the Collector of Central Excise (Appeals) had already decided the issue in favour of the manufacturers under his Order dated 2-4-87. They therefore, sought quashing of the show cause notice. They also contested the claim on merits. The Assistant Collector did not accept this submission. Instead, he noted that the order of the Collector (Appeals) had not been “accepted” and the department had filed an appeal before the CEGAT at Bombay. The Assistant Collector passed his adjudication order confirming duty demand. When the assessee took the matter in appeal before Commissioner (Appeals) he noted that the adjudicating authority was bound to follow the order of the appellate authority. On merits also he found against the adjudication order and allowed the appeal. The Commissioner of Central Excise CCE, Vadodara filed an appeal against the order of the Commissioner and the present referral order has been passed by the Division Bench in the course of considering that appeal.
3. The appeal of CCE, Vadodara also admits that the adjudication order was passed contrary to the order-in-appeal passed on the issue by the appellate Collector. There could be no arguing that an original authority is not bound by the orders of the appellate authority. The adjudication order having been passed contrary to the decision of the appellate authority, the same could not be allowed to stand. Therefore, the Commissioner was fully justified in setting aside that order. The appeal against such an order has no merit. The appeal should fail on that ground alone. Certainty about law and uniformity in its implementation are central in ensuring rule of law. Therein lies the necessity to follow precedent and subordination of adjudicating authorities to their appellant authorities. Uniformity in tax administration is even more important than legal correctness. This has time and again been stressed by the Apex Court. We may reproduce here the relevant portion of
the decision of the Apex Court in the case of Kamlakshi Finance Cotporation Ltd., 1991 (55) E.L.T. 433 which has been relied upon by the Commissioner (Appeals) while passing his order :
“The order of the Appellate Collector is binding on the Assistant Collectors working within his jurisdiction and the order of the Tribunal is binding upon the Assistant Collectors and the Appellate Collectors who function under the jurisdiction of the Tribunal. The principles of judicial discipline require that the orders of the higher appellate authorities should be followed unreservedly by the subordinate authorities. The mere fact that the order of the appellate authority is not “acceptable” to the department – in itself an objectionable phrase – and is the subject matter of an appeal can furnish no ground for not following it unless its operation has been suspended by a competent Court. If this healthy rule is not followed, the result will only be undue harassment to assessees and chaos in administration of tax laws”.
4. Now to come to the reference. It has been made on the ground that there is difference of opinion between the decision of the CEGAT in J.S.W. Iron & Steel Industries v. CCE, Chandigarh, 1999 (105) E.L.T. 428 (T); CCE, Vadodara v. Adarsh Steel Re-rolling Mills (Final Order Nos. 993-994/99-B) and CCE v. Shreemm Steel Industries & Engg. Works, 2000 (116) E.L.T. 389. It may also be noted that the referral order itself has noted that the issue remains covered by a circular of the Central Board of Excise and Customs.
5. Again, the binding nature of circulars is well settled. Revenue authorities are not to go against the circulars issued by their superiors. A strict following of this principle is also essential to ensure stability and uniformity which are hallmarks of rule of law 1999 (112) E.L.T. 765 Paper Products Ltd. v. CCE and 1996 (87) E.L.T. 19 (S.C) Ranadey Micronutrients v. CCE.
6. The notifications in question granted exemption to iron and steel product mentioned in Column 3 of the table attached to the notification provided that they are made from any of the goods specified in the corresponding entry in Column 2 of the Table 2 of the notification. The ground taken in the order-in-original and canvassed in the present appeal of the Commissioner is that the re-rollable scrap used by the present assessee would be classifiable as waste and scrap of iron and steel as they are obtained from the breaking of railway locomotives and the sub-heading for waste and scrap 7203, and 7204, are not mentioned in SI. No. 2 under Notification No. 208/83. That in the subsequent notifications also re-rollable waste and scrap are not mentioned under Sl. No. 2 of the table. The referral order notes that there is difference of opinion between the co-ordinate Benches of the Tribunal on the issue.
7. During the hearing of the reference learned Counsel for the assessees submitted that this objection is entirely misconceived. He pointed out that re-rollable materials have never been treated as waste and scrap under the Central Excise Tariff. He referred in this connection to Ministry’s clarification No. B-28/8/83-TRU, dated 8-9-83 wherein under Para 10 it was clarified with regard to classification of waste and scrap that “waste and scrap means waste and scrap of iron and steel fit only for the recovery of metal or used for the manufacture of chemical”. It also stated that “other kinds of product commonly known as re-rollable and industrial scrap which are used for purposes other than this would not merit classification as waste and scrap. These products would have ‘to be classified under the relevant item 25 as per definition given in the explanation in the said item.” The Circular No.
27/89, dated 21-9-89 re-iterated this position. It stated that “Heading 7204 would not cover an article which could be converted into another article by hot rolling without it being necessary to remelt the metal first. The Board; therefore, concluded that Heading No. 7204 read with Note 6(a) 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 circular concluded this: “Therefore, the denial of benefit of exemption Notification No. 202/88, dated 20-5-1988 on the grounds that re-rollable scrap is waste and scrap falling under Heading 7204 is not correct”.
8. With regard to the conflicting decisions mentioned in the referral order the learned Counsel pointed out that the decision in JSW Iron & Steel Industry was passed taking note of Circular No. 27/89, dated 21-9-89 and remanded the case for re-consideration in the light of the circular. Tribunal’s Final Order Nos. 993-994/99-B, dated 13-9-99 in the appellant’s own case had been passed without taking note of the circular. Same is the position in the case of Sreeram Steel Industry also. The Tribunal confirmed the denial of the exemption holding that re-rollable scrap being not specified in the table of Notification No. 202/88, benefit of the exemption notification is not available. This order also was passed without taking into account the Board’s Circular on the subject. It is the submission of the learned Counsel for the assessee that since it is settled law that Board’s circulars are binding, the denial of the exemption which is contrary to the circulars cannot be sustained.
9. Another objection found mention in the adjudication proceeding is that the inputs should have suffered excise duty under Chapter 72 or
Chapter 73. With regard to this requirement, the learned Counsel pointed out that Notification No. 202/88 contained an explanation that for the purposes of this notification all stocks of inputs in the country, except such stocks as are clearly recognizable as being non duty paid or charged to Nil rate of duty, shall be deemed to be the inputs on which duty has already been paid. The learned Counsel for the appellant further pointed out that Ministry has already clarified as under vide Dte. of Tax Research F. No. B-28/8/83-TRU, dated 8-9-83.
“3. Under Notification No. 208/83-CE., certain final products have been fully exempted if they are produced out of specified inputs on which duty has been paid. Inputs purchased from the market have also been deemed to be duty paid vide Explanation to this notification. Some doubts have since been raised as to whether old and used items used in the manufacture of final products can be considered to be inputs for the purpose of this notification, it is clarified that no distinction need be made between fresh unused items and old and used items for the purpose of this notification. Old and used items should also be considered to be inputs and deemed to be duty paid for the purpose of this notification so long as their physical characteristics render them classifiable under any of the sub-items mentioned under the input column in the said notification. It is also clarified that old, used and unserviceable rails which are purchased by re-rollers for cutting and rolling into various other products cannot be considered as materials for railway track construction. As such, they would fall under sub-item (11) of the new Item No. 25 which covers unspecified angles, shapes and sections and hence, the
same may be treated as inputs for the purpose of Notification No. 208/83-C.E., da ted 1-8-83”.
10. The learned Counsel has pointed out that in the light of the above clarification, all used materials like railway track are eligible for the exemption. In the present case one of the sources of inputs is the breaking of condemned railway engines. In the adjudication proceedings the appellants had submitted that their inputs are from diverse sources while the Revenue contended that the materials are from breaking of condemned locomotive engines. However, there is no specific evidence that they are inputs which are “clearly recognizable as non-duty paid or charged to nil rate of duty”.
11 As against the above submissions made on behalf of the as-sessee, learned DR pointed out that the period of dispute, 1-4-87 to 31-3-90, fell under three notifications namely, Notification Nos. 208/83, dated 1-3-83, 90/88, dated 1-3-88 and 202/88, dated 13-5-88. The learned SDR pointed out that the description of inputs under Notification No. 208/83 was with regard to their Central Excise classification and it did not cover sub-headings for waste and scrap (7203 or 7204). It was therefore, contended that the order-in-original was right in holding that the appellant would not get the benefit of the exemption as the goods were waste and scrap emerging from the breaking of condemned railway engines. The learned DR pointed out that under Notification No, 90/88 and Notification No. 202/88 also waste and scrap found no mention. Therefore, during the entire period the appellant could not get the benefit of the exemption.
12. We are unable to accept the contention that the inputs in question are waste and scrap not included within the purview of the relevant Notifications. What constitutes waste and scrap of iron and steel had engaged the Board’s consideration both under the old Central Excise Tariff and New Central Excise Tariff. It is clear from the various clarifications issued from time to time and mentioned earlier in Para 6 of this order that the term waste and scrap would cover only waste and scrap generally used for remelting and that re-rollable scrap which is not for remelting will have to be classified in other appropriate headings. Circular No. 27/89 confirmed this position after taking into account note to the relevant chapter heading and HSN explanatory notes.
13. There is no dispute that the inputs used by the appellant were not materials requiring remelting. They were angles, shapes etc. and were used for further manufacture through re-rolling. Therefore, the circulars of the Board clearly applied to them. They could not be treated as waste and scrap. They were classifiable as angles, sections etc. which are covered by the notification. The denial of the exemption being contrary to the classification of the Board, cannot be upheld since it is settled law that circulars of the Board should prevail so as to ensure certainty, stability and uniformity in tax, administration.
14. In the light of the discussion above, we answer the reference in favour of the assessee. And the appeal of Commissioner is rejected in view of our finding that the appellant’s claim to the exemption is covered by the circulars of the Board.