1997 Supreme(SC) 315

1997(4) Supreme 625
Supreme Court of India
S.P. Bharucha and S.B. Majmudar, JJ.
Steel Authority of India Ltd.
-Appellant
versus
Collector of Central Excise, Bolpur -Respondent
Civil Appeal No. 2766 of 1991
Decided on 20-2-1997
Counsel for the Parties :
For the Appellant : V. Sridharan, R. Nambirajan, Sunil Jain and Vijay Hansaria, Advocates.
For the Respondent : Dr. R.R. Mishra, Sr. Advocate, V.K. Verma and S.P. Aggarwal, Advocates.

Headnote:Excise Duty-Central Excise and Salt Act, 1944-Central Excise Rules-Notification No. 150/77-Dated 18.6.1977 as amended by Notification No. 209/77 dated 2.7.1977-Demand notices-Demand of duty on iron in crude form used by appellant-company in manufacture of steel melting scrap-Company manufactures pig iron, steel ingots and several steel products-Company paying excise duty on these items following principle of later the better -Entire process of manufacturing steel ingots from crude iron was a uniform, composite and combined process-impugned notices would result in double taxation on input of pig iron which got embedded in steel ingots-Impugned demands and consequential adjudication are quashed-Refund of Rs. six lakhs deposited by appellant pursuant to order of CEGAT will have to be processed in accordance with law.

       Held, a mere look at the aforesaid notification shows that it seeks to permit a set off of excise duty payable on the final product manufactured by the appellant by utilising the input of pig iron to the extent of the amount of excise duty which might have been paid by the assessee on the utilised input of pig iron which ultimately resulted into the final products. Those final products are either steel ingots covered by Tariff Item 26 or iron or steel products falling under Tariff Item 26AA. It is pertinent to observe that the said exemption/set off notification does not cover final product of steel melting scrap mentioned in Tariff Item 26 which obviously results as an unplanned by-product. (Para 9)

       In the absence of relevant data being available or even tried to be produced by the respondent-department on the record of this case, it is impossible to bifurcate and try to find out as to what part of the input of pig iron resulted into the manufacturing of steel ingots and what part of the very same input of pig iron got embedded in the emerging by-product of steel melting scrap. In the absence of such bifurcation, the impugned notices would obviously result in double taxation of the input of pig iron which got embedded in steel ingots that became liable to bear full excise duty and for which there is no dispute between the parties. As the process for manufacturing steel ingots by utilising the input of crude iron was a single uniform process, such bifurcation even otherwise was not possible even if it was so attempted by the respondent-department. The impugned show cause notices make clear, in this connection, that they seek to levy basic excise duty for the relevant period on the entire input of pig iron by seeking to bring it to tax on the basis of the entire output of steel melting scrap. In other words, these notices seek to equate total quantity of steel melting scrap with the embedded proportionate input of pig iron. This is clearly impermissible. It is obvious that steel melting scrap, as a final product, is exigible to nil rate of duty as there is no dispute between the parties that it is fully covered by exemption Notification No. 150/77 dated 18.6.1977. In fact, that is the very basis for the impugned notices, as seen earlier. If that is so, the impugned notices indirectly seek to bring to tax the entire quantity of steel melting scrap by treating it to be resulting from the total input of pig iron, which directly could not have been brought to tax. Once entire quantity of steel melting scrap is exempted from excise duty as per Notification of 18.6.1977, it is difficult to appreciate how the very same quantity of scrap can be taken as a basis for levying tax on input of pig iron embedded therein when admittedly a substantial part of the very same input had resulted in a different duty paid product, namely steel ingots and for manufacturing the same substantial quantity of pig iron had stood utilised. (Para 9)

       Consequently, it must be held that the impugned demands of excise duty clearly resulted in seeking to recover excise duty twice on the input of pig iron utilised by the appellant in manufacturing the final product of steel ingots and which in the same process as a by-product gave rise to steel scrap which was fully exempted from excise duty on account of the concerned exemption notification. (Para 10)

       With respect, the error committed by the CEGAT is to the effect that it had failed to appreciate that though duty on the input of pig iron at prior stage was not paid, whole of that duty got paid on clearance of steel ingots which were the main final product and the emergence of a minor by-product like steel melting scrap which might have been cleared on payment of nil duty had no impact whatsoever for enabling the department to once again bring to tax the same input of pig iron. (Para 11)