2005 (98) ECC 65 (Tri)
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
South Zonal Bench : Bangalore
Dr. S.L. Peeran, Member (J) and K.C. Mamgain, Member (T)
Hindustan Zinc Ltd.
Versus
Commissioner of Central Excise, Visakhapatnam
Appeals No. E/359 to 361/2003
[Arising out of Order-in-Original No. 94-96/2002 dated 31.12.2002 passed by the Commissioner of Central Excise, Visakhapatnam]
Final Order No. 1229-1231/2004, dt. 12.7.2004, Certified on 20.7.2004
Words & Phrases
Slag -- Slag obtained in manufacture of blooms and billets is neither marketable nor has any commercial value. It does not contain any recoverable metal and hence not excisable. It is simply a waste, which has arisen during the process of manufacturer of ingots.
Excisability
Slag -- It is neither a marketable commodity nor it has arisen as manufactured commodity but it is simply a waste, which has arisen during the process of manufacture of ingots. Therefore it cannot be held as excisable commodity under note 3 to Chapter 26 of the Central Excise Tariff Act.
Classification (C. Excise)
Slag -- Sub-heading 2620 -- Slag is neither used for extraction of metal nor it is the basis for manufacture of chemical compounds of metal as mentioned in Note 3 to Chapter 26. Therefore, the slag can also not be classifiable under sub-heading 2620.00.
PRESENT :
Shri G. Shivadas, Adv. for the appellant.
Shri L. Narasimha Murthy, SDR for the respondent.
Cases Cited :
1. Adhir Dutt Instruments Pvt. Ltd. v. CCE, 2001 (130) ELT 377............................ [Para 2]
2. Amar Wire & Rolling Mill v. CCE, Mumbai, 1999 (114) ELT 41........................... [Para 2]
3. CCE Bangalore v. Astra IDL Ltd., 2002 (141) ELT 741...................................... [Para 2]
4. CCE Chennai v. Modi Steel Wire Manufacturing Co., 2004 (95) ECC 67 (T)......... [Para 2]
5. CCE Jaipur v. Mehta Vegetables Products, 1997 (93) ELT 229.......................... [Para 2]
6. CCE Patna v. Tata Iron & Steel Co. Ltd., 2004 (92) ECC 257 (SC)..................... [Para 2]
7. CCE v. Dhillon Kool Drinks & Beverages Ltd., 2001 (130) ELT 475.................... [Para 2]
8. CCE, Ahmedabad v. Amol Decalite Ltd., 1999 (105) ELT 222............................ [Para 2]
9. Elphinstone Metal Rolling Mills v. CCE, Bombay, 2004 (94) ECC 197 (SC).......... [Para 2]
10. ITC Ltd. v. CCE, Bombay, 2002 (53) RLT 995 (SC)......................................... [Para 2]
11. Lili Foam Industries (P) Ltd. v. CCE, 1989 (24) ECC 81 (T).............................. [Para 2]
12. Mukund Ltd. v. CCE, 2002 (148) ELT 677................................................. [Paras 2, 5]
13. National Steel Industries v, CCE, Indore, 2003 (110) ECR 465......................... [Para 2]
14. Sandur Manganese v. CCE, 2004 (94) ECC 243 (T)......................................... [Para 2]
15. Tata Iron & Steel Co. Ltd. v. CCE, 1997 (94) ELT 258............................... [Paras 2, 5]
16. Tata Metallic Ltd. v. CCE, 2003 (155) ELT 117............................................... [Para 2]
17. Union Carbide (I) Ltd. v. CCE Chennai, 2002 (139) ELT 673............................. [Para 2]
18. Union of India v. Ahmedabad Electricity Co. Ltd., 2003 (90) ECC 249 (SC).. [Paras 2, 5]
19. Union of India v. Indian Aluminium Co. Ltd., 1995 (77) ELT 268 (SC).......... [Paras 2, 5]
Per : K.C. Mamgain
Heard both sides.
2. The appellants are manufacturers of zinc ingots and lead ingots. During the process of manufacture of zinc ingots, a waste material called W.K. slag emerges which contain less than 1% lead and more than 2% zinc. This is unfit for recovery of any metal because of low content of the metal. During the manufacture of lead ingots from lead concentrate by a process known pyro metallurgical process lead slag emerges as a waste product. It is tapped from the blast furnace and is shifted from the plant area to dump yard. The content of lead in the slag is around 1.5%. On the basis of the ER I return filed by the appellants it was found by the central excise that they have cleared lead slag and W.K. slag for captive consumption without payment of central excise duty for construction of jarosite pond claiming exemption from payment of duty under Notification 67/95 dated 1.3.95. As per proviso to this Notification, exemption from duty is given on the goods used within the factory of production in relation to manufacture of final product subject to condition that final product should be cleared on payment of duty. Since it was found that lead slag and W.K. slag was utilized in construction of jarosite pond, therefore three demand show cause notices were issued and action for penalty was also proposed. The Commissioner confirmed duty of Rs. 52,51,465 on lead slag and Rs. 5,82,400 on W.K. slag for clearance from September 01 to November 01 and Rs. 1,30,624 on clearance of W.K. slag from December 01 to June 02. He also imposed a penalty of Rs. 5,00,000 on the appellant. The reason given by him was that both led slag and W.K. slag are classifiable under heading 2620.00 and are liable to duty. These goods were used for construction of Jarosite pond, which is a part of eco circuit in which the final product zinc is manufactured. Jarosite pond is not in any way connected to the process of production of zinc but is an anti pollution measure and cannot be considered as inextricably linked to the manufacturing process of zinc. Slag is used for embankment of jarisite pond and is not eligible for exemption under Notification No. 67/95. In their appeal learned advocate Shri G. Shivadas pleaded that excise duty is leviable only on goods that emerge as a result of process of production or manufacture. The appellants have not manufactured either lead slag or W.K. slag which are mere residue and waste products arising out of manufacture of lead and zinc respectively. Therefore these slags are not excisable goods. He relied on the following decisions.
(a) Union of India v. Indian Aluminium Co. Ltd., 1995 (77) ELT 268 (SC)
(b) Union of India v. Ahmedabad Electricity Co. Ltd., 2003 (158) ELT 3 (SC)
(c) CCE Patna v. Tata Iron & Steel Co. Ltd., 2004 (92) ECC 257 (SC) : 2004 (165) ELT 368 (SC)
(d) Elphinstone Metal Rolling Mills v. CCE, Bombay, 2004 (94) ECC 197 (SC) : 2004 (167) ELT 481 (SC)
(e) CCE Jaipur v. Mehta Vegetables Products, 1997 (93) ELT 229)
(f) Amar Wire & Rolling Mill v. CCE, Mumbai, 1999 (114) ELT 41
(g) Mukund Ltd. v. CCE, 2002 (148) ELT 677
(h) Tata Iron & Steel Co. Ltd. v. CCE, 1997 (94) ELT 258
(i) CCE v. Dhillon Kool Drinks & Beverages Ltd., 2001 (130) ELT 475
(j) Affirmation of the decision by the Supreme Court, 2002 (144) ELT A 210
(k) CCE Bangalore v. Astra IDL Ltd., 2002 (141) ELT 741
(l) Tata Metallic Ltd. v. CCE, 2003 (155) ELT 117
(m) National Steel Industries v, CCE, Indore, 2003 (110) ECR 465
He also stated that in their own case, the Commissioner Central Excise (Appeals) in Order-in-Appeal No. 27/92 (V) CE dated 30.7.92 has held that zinc slag, lead slag zinc dross etc., are to be treated as non-dutiable since they are neither goods nor they are marketable. The appellants are not stopped from challenging excisability of the product merely on the ground that they had indicated the product in their RT 12 returns. In support they relied on the following decisions.
(a) ITC Ltd. v. CCE, Bombay, 2002 (53) RLT 995 (SC)
(b) Lili Foam Industries (P) Ltd. v. CCE, 1989 (24) ECC 81 (T) : 1990 (46) ELT 462
(c) Adhir Dutt Instruments Pvt. Ltd. v. CCE, 2001 (130) ELT 377
(d) CCE Chennai v. Modi Steel Wire Manufacturing Co., 2004 (95) ECC 67 (T) : 2004 (62) RLT 555 (T)
He also pleaded that sub-heading 2620.00 covers ash and residues (other than from manufacturing of iron and steel) containing metal or metal compounds. Note 3 to Chapter 26 of the Central Excise Tariff specifically provides that heading No. 26.20 applies only to ash and residues of a kind used in industry either for the extraction of metals or as a basis for the manufacture of chemical compounds of metals. This heading does not apply to items like lead slag and W.K. slag since they are not used in industry either for extraction of metals or as a basis for manufacture of chemical compound of metals. This is supported by HSN explanatory notes to Chapter Heading 26.20 which is as under:
"This heading covers ash and residues (other than those of heading 26.18, 26.19 or 71.12) which contain metal or metal compounds, and which are of a kind used in industry either for the extraction of metal or as a basis for the manufacture of chemical compounds of metals......"
He finally pleaded that the goods that are not mentioned in the schedule are not excisable goods leviable to duty under Section 3 of Central Excise Tariff Act. He relied on the following decisions
(a) CCE, Ahmedabad v. Amol Decalite Ltd., 1999 (105) ELT 222
(b) Union Carbide (I) Ltd. v. CCE Chennai, 2002 (139) ELT 673
(c) Sandur Manganese v. CCE, 2004 (94) ECC 243 (T) : Final Order No. 754/2004 dated 6.4.2004 of the CESTAT Bangalore.
He therefore pleaded that their appeal may be allowed.
3. Shri L. Narasimha Murthy learned SDR appearing for revenue reiterated the ground taken by the Commissioner in his order.
4. We have carefully considered the submissions made by both the sides. The issue whether lead slag and W.K. slag are excisable or not was raised before the Commissioner. It was pleaded before the Commissioner that that slag is nothing but a mere muck and sand which has been used in the embankment in construction of jarosite pond. The Commissioner has not accepted the submission of the appellant that slag is a useless waste and being non-usable cannot be considered liable to duty. The main ground for rejecting the plea of the appellant was that the appellants were declaring the production and removal of slag in their returns and they have shown it classificable under sub-heading 2620.00. He also did not accept the plea of non-marketability of the products on the ground that occasional sales were made by them of both lead slag and W.K. zinc slag. Therefore he classified these products under sub-heading 2620.00 and held that these products are not liable for exemption under Notification No. 67/95 for captive consumption.
5. We find that first it is necessary to consider whether the product slag is an excisable commodity or not. As per Oxford Dictionary slag means refuse left after ore has been smelted. Whether slag is covered by excisable goods or not has been examined by the Tribunal in case of Mukund Ltd. v. CCE, Mumbai, 2002 (148) ELT 677 where it was held that slag obtained in manufacture of blooms and billets is neither marketable nor has any commercial value. It does not contain any recoverable metal and hence not excisable. In another case Tata Iron and Steel Company Ltd., v. CCE, Patna, 1997 (94) ELT 258, Tribunal has held that molten slag though sold by assessee is not a marketable commodity in commercial sense hence not excisable. The Supreme Court in the case of UOI v. Indian Aluminium Co. 1995 (77) ELT 268 has held that everything which is sold is not necessarily a marketable commodity as known to the commerce. Dross and skimming are not marketable commodity even if they can be sold to recover some metal. In case of UOI v. Ahmedabad Electricity Co., 2003 (90) ECC 249 (SC) : 2003 (158) ELT 3 (SC), the SC has held that mere listing of an item in schedule to Central Excise Tariff Act, 1985 is not sufficient to make it excisable as they have to pass further tests of being manufactured or produced in India which is sine qua non for imposition of duty. They also held that transformation by skilful manipulation of raw material bringing into existence new substance and nor merely some change in a substance is required to holding a process as amounting to manufacture. Applying these principles to the slag which is under dispute in the present case, we find that it is neither a marketable commodity nor it has arisen as manufactured commodity but it is simply a waste which has arisen during the process of manufacture of ingots. Therefore it cannot be held an excisable commodity. We also find that Note 3 to Chapter 26 of the Central Excise Tariff Act which reads as under:
"heading No. 2620 applies only to ash and residue of a kind used in industry either for extraction of metals or as a basis for manufacture of chemical compounds of metals"
We find that the slag is neither used for extraction of the metal nor it is the basis for manufacture of chemical compounds of metal No evidence has been produced by the Department that it can be used for either of these two purposes mentioned in Note 3 to Chapter 26. Therefore, the slag can also not be calssifiable under sub-heading 2620.00 has been done by the Commissioner. In the circumstances, we find that neither it is an excisable product liable for central excise arisen due to manufacture nor it is marketable commodity. It is also not covered by sub-heading 2620.00. Therefore, no duty can be charged on these products. This position was also held by the Commissioner appeals in case of same assessee in his Order-in-Appeal No. 27/92/(V)-CE dated 30.7.92. Therefore we do not find any merit in the order of the Commissioner and the same is set aside. All appeals are allowed with consequential relief if any.
………………………..