JUDGMENT

MRS. SUJATA V.MANOHAR, J:—All these appeals have been filed at the instance of the Union of India and the Collector of Central Excise. The respondent in all these appeals manufacture aluminium products such as aluminium sheets, aluminium shapes, aluminium angles etc, out of aluminium ingots. In the process of manufacture, at the stage of processing, dross and skimmings arise and accumulate in the furnace in the shape of ashes as a result of oxidation of metal. These ashes are formed mainly during the melting down of aluminium ingots and, to some extent, during subsequent treatment and holding operation of molten baths in the furnace. Dross consists mostly of oxides, non-metallic material and other foreign material which separates or forms during melting and holding operations, and finally accumulates on the surface of the molten bath. It has to be removed. Skimmings are mostly thin oxide layers obtained by skimming a molten bath prior to metal transfer on casting. The skimming operation is essential to the manufacturing process. Dross and skimmings, according to the assessees, represent a process-loss or a melt-loss. Aluminium dross and skimmings contain a certain amount of metal from which they come. But they lack not only metal body but also metal strength, formability and character. Such dross and skimmings are, therefore, distinct from scrap which is a metal of as good a quality as the prime metal from which it arises. In all these appeals, we are concerned with the question of exigibility of such aluminium dross and skimmings to excise duty.

CIVIL APPEAL NO.............OF 1995

(Arising out of SLP(C) No.11315 of 1987)

2. Delay condoned.

Special leave granted.

In this appeal, we are concerned with the question of levy of excise duty on aluminium dross and skimmings removed by the assessees between September 1972 and March 1973.

2A. The aluminium ingots, which were the raw material obtained from outside and used by the assessees, and the aluminium sheets which were manufactured by the assessees out of these ingots, were both liable to payment of excise duty under Tariff Item 27 as it stood at the relevant time. It is an accepted position that Tariff Item 27 as it stood at the relevant time made no mention of aluminium dross and skimmings. The Excise Tariff also did not have, at the relevant time, Tariff Item 68 which is a residuary item covering goods not elsewhere specified (but excluding certain goods set out therein). Item 68 was introduced in the Central Excise Tariff only in 1975. Aluminium dross and skimmings were, therefore, not excisable at the relevant time.

3. The assessees cleared their manufactured product viz. aluminium sheets by following the procedure under Rule 56A of the Central Excise Rules, 1944. Thus Rule provides for a special procedure for movement of duty-paid material and component parts for use in the manufacture of finished excisable goods. The assessees claimed credit for the duty paid on aluminium ingots while clearing aluminium sheets manufactured by them. They also cleared aluminium dross and skimmings without payment of any excise duty.

4. By a show-cause notice dated 7-2-1974 the assessees were, however, asked to pay excise duty on dross and skimmings removed by them between September 1972 and March 1973. This show-cause notice was confirmed by the Assistant Collector. However, the Appellate Collector of Central Excise allowed the appeal preferred by the assessees. A revision preferred by the excise authorities was, however, allowed by the Government of India. This decision was challenged by the assessees by filing a writ petition which was allowed by a learned single Judge of the High Court. An appeal before the Division Bench of the High Court was summarily dismissed. The present appeal is filed by the department from the decision of the Division Bench of the Bombay High Court upholding the decision of a learned single Judge of that Court.

5. Under Section 3 of the Central Excises and Salt A