Balaji Enterprises, Madras vs Collector Of Central Excise, Madras

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1997 Supreme(SC) 808

1997(5) Supreme 397
Supreme Court of India
S.P. Bharucha and Suhas C. Sen, JJ.
M/s. Balaji Enterprises, Madras -Appellant
versus
The Collector of Central Excise, Madras -Respondent
Civil Appeal No. 1403 of 1987
Decided on 5-5-1997
Counsel for the Parties :
For the Appellant : Krishnan Venugopal, S.R. Setia, Advocates.
For the Respondent : N.K. Bajpayee, R.S. Rana, Advocates for P. Parmeswaran, Advocate.

Headnote:Excise Tariff-Central Excise Tariff-Tariff Item 27(a)(i) before 1.3.1981-Aluminium in crude form-Appellant purchases aluminium ingots and manufactures aluminium containers-In process of manufacturing containers, waste products such as aluminium scrap also generated-Whether aluminium scrap can be described as aluminium in any crude form as mentioned in Tariff Item 27(a)(i) ?-(No)-Legislative intent was not to tax aluminium scrap and Waste prior to amendment made w.e.f. 1.3.1989.
       Held : From the Tariff Description it appears that in sub-item (a)(i) of Tariff Item 27 crude form of aluminium will include ingots, bars, blocks, slabs, billets, shots and pellets. That is the most primary form of the metal. Sub-item (b) of Tariff Item 27 speaks of Aluminium Manufactures , namely, plates, sheets, circles, strips, shapes and sections in any form or size not otherwise specified . There is no dispute that the appellant manufactures circles which have been specifically included in T.I. 27(b) and not T.I. 27(a). Circles have not been included in the Tariff Description in T.I. 27(a)(i). That means circles have not been treated as aluminium in any crude form but Aluminium Manufactures . The assessee manufactures the circles and thereafter aluminium containers out of these circles. The scraps are generated while converting circles which are not aluminium in crude form into containers which are finished goods. If anything is made out of the circles, whether as end-product or by-product, it cannot be treated as the metal itself in crude form. The scraps that arise out of the manufacturing process do not go back to the crude form of aluminium. When ingots are converted into circles, the end-products are not treated as aluminium in crude form. In that event, how can something which emerges as a result of further manufacturing process be treated as crude metal ? In our view, the aluminium scraps cannot be treated as aluminium in crude form and classified as such in T.I. 27(a)(i). (Para 7)
       The position becomes clearer after the amendment of T.I. 27 on and from 1.3.1981. Waste and Scrap was specifically included in sub-heading (aa) of T.I. 27. (Para 10)
       The amendment left sub-item (a) of Item 27 untouched. Moreover, every type of waste and scrap was not made taxable after the amendment made on 1.3.1981. Only the type of waste and scrap mentioned in Explanation III were subjected to duty. Sludge, dross, scalings, skimmings, ash and other residuals were left out. Before 1.3.1981 there was no guideline to decide what would constitute scrap for imposition of Central Excise. (Para 11)
       Sub-item (aa) was not clarificatory of sub-item (A) of Item 27. It was a new entry altogether bringing Waste and Scrap for the first time to duty after specifying the limited scope of this entry by adding Explanation III. (Para 12)
       It has been rightly contended on behalf of the appellant that whenever things like Waste and Scrap , under any head, have been sought to be taxed in the Central Excise Act, specific entries have been made for this purpose. (Para 13)
       (ii) Central Excise Tariff-Tariff Item 27 as amended w.e.f. 1.3.1981 - Waste and Scrap specifically included in sub heading (aa) of T.I. 27-Sub-item (aa) not clarificatory of sub-item (A) of item 27-It was a new entry bring Waste and Scrap for first time to duty after specifying limited scope of this entry by adding Explanation III. (Para 12)

JUDGMENT

Sen, J.-The appellant, Balaji Enterprises, purchase aluminium ingots from the market and manufactures aluminium containers which are used according to the permission granted by the Excise Authority under Rule 56A of the Central Excise Rules. The process followed for making the containers has been stated by the appellant in a letter to the Assistant Collector of Central Excise. The appellant melts the ingots, converts them into slabs, rolls them into sheets which are converted into circles. These circles are converted into containers which are sold in the market. The appellant pays duty on the containers manufactured by it in regular course. In the process of manufacturing containers, waste products such as aluminium scrap also come into existence.

2. The Central Excise Authority called upon the appellant to pay duty on the scrap manufactured by it. The appellant was compelled to pay duty on the value of the scrap at the rate of 40 per cent under Tariff Item 27(a)(i) of the Central Excise Tariff.

3. The appellant s case before the Department was that scraps generated in course of manufacture of aluminium containers by the appellant, could not be classified under T.I. 27(a)(i) of the Central Excise Tariff which before 1.3.1981 was as under :-

27 - Aluminium

Tariff Rate of duty

Item Description of goods Basic Special No. Excise

27. Aluminium

(a) (i) in any crude form including ingots, bars, 50% Adv. plus 10% of the

blocks, slabs, billets, shots & pellets. Rs. 2000/- per basic duty metric tonne. chargeable

(ii) Wire, bars, wire rods and castings not 50% Adv. plus -do- otherwise specified. Rs. 2000/- per metric tonne.

(b) Manufactures, the following, namely, plates, -do- -do- sheets, circles, strips, shapes and sections in any form or size, not otherwise specified.

(c) Foils (whether or not embossed, cut to shape, -do- -do- perforated, coated, printed or backed with paper or other reinforcing material) of a thick- ness (excluding any backing) not exceeding 0.15 mm.

(d) Pipes and tubes other than extruded pipes and -do- -do- tubes.

(e) Extruded shapes & sections including extruded -do- -do- pipes and tubes.

(f) Containers, plain, lacquered, or printed, or -do- -do- lacquered and printed.

Explanation : I -"Container" means containers ordinarily intended for packaging of goods for sale, including collapsible tubes, casks, drums, cans, boxes, gas cylinders and pressure containers whether in assembled or unassembled condition, and containers known commercially as flattened or folded containers.

Explanation : II -In this Item, the expression "Aluminium" shall include any alloy in which aluminium predominates by weight over each of the other metals.

4. The appellant s case is that aluminium scrap cannot be described as aluminium in any crude form . Aluminium scraps are not really in crude form. In fac

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1997 Supreme(SC) 808

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