IMPORTANT POINT
Zinc dross and flux skimming are not excisable articles.

Headnote:Central Excise Tariff Act - Chapter 26 Sub-heading 2620.00 and 2620 - Question whether zinc dross and flux skimming were excisable articles - Respondent manufactured aluminium sheets - In the manufacturing process as a result of oxidation a layer/film was formed which was removed by skimming and second layer so removed was called dross - Tribunal relying on Indian Aluminium case held dross not excisable article - Appeal - Percentage of metal in dross may not by itself make it excisable if it was otherwise not - An article was not exigible to tax only because it might have some saleable value - Even assuming that dross having a high percentage of metal was marketable commodity, question would be whether same could be said to be a manufactured product - It could not be said to be a manufactured product - No reason to interfere.
       Held : Records maintained by Respondent whereupon the Revenue has relied upon may be a relevant factor to identify ‘dross’ as a marketable commodity but then percentage of the metal in dross may not by itself make it excisable, if it is otherwise not. An article is not exigible to tax only because it may have some saleable value.(Para 18)
       It may be that dross no longer answers the description of “waste and scrap” in view of the changes made in the Tariff. It is, however, almost well-settled that even if some percentage of metal is found in the dross the same in absence of something more in the entry would not be rendered as an excisable article. This Court in Indian Aluminium (supra) in fact noticed that some amount of metal is found in dross and skimming. A distinction, however, was made that dross and skimming are not metals in the same class as `waste or scrap’. Even assuming that dross having a high percentage of metal is a marketable commodity, the question, in our opinion, would arise as to whether the same can be said to be a manufactured product. The term `manufacture’ implies a change. Every change, however, is not a manufacture. Every change of an article may be the result of treatment, labour and manipulation. But manufacture would imply something more. There must be a transformation; a new and different article must emerge having a distinctive name, character or use. [See Union of India and Another v. Delhi Cloth and General Mills Co. Ltd. AIR 1963 SC 791]. (Para 19)
       We have noticed hereinbefore as to how dross comes into being. The learned Additional Solicitor General submitted that in Indian Aluminium (supra) itself this Court held that ‘undoubtedly dross and skimming do arise during the process of manufacture’, but, it was not held therein that it amounts to manufacture.(Para 20)
       In this case also, it has not been contended that the article was obtained during the process of manufacture. It was faintly suggested by the learned Additional Solicitor General that the proposition of law in Tata Iron and Steel Co. Ltd. (supra) has been overstated, but in view of our findings aforesaid we do not think that we should enter into the said question.(Para 23)

JUDGMENT

S.B. Sinha, J. - Whether zinc dross and flux skimming are excisable articles is the question involved in this appeal, which arises out of a judgment and order dated 25.06.2004 passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi, allowing the appeal filed by Respondent herein.

2. Respondent herein manufactures aluminium sheets, the raw material wherefor is aluminium oxide. In the melting furnance, the top layer of the molten metal is exposed to atmosphere and gets oxidized. As a result of oxidation, a thin layer/film is formed which is removed by skimming. The second layer so removed is called dross. Indisputably, the percentage of metal in dross will vary and there would be some quantity of aluminium metal therein.

3. Whether excise duty is payable on ‘dross’ came up for consideration before a Bench of this Court in Respondent’s own case i.e. in Union of India and Others v. Indian Aluminium Co. Ltd. and Another, [1995 Supp (2) SCC 465 : 1995 (77) ELT 268]. The said decision has been followed by a 3-Judge Bench of this Court in Collector of Central Excise, Patna v. Tata Iron & Steel Co. Ltd. [(2004) 9 SCC 1].

4. The Tribunal by reason of its impugned judgment following Indian Aluminium (supra) and Tata Iron and Steel Co. Ltd. (supra) opined that the issue is covered by the said decisions.

5. Mr. Gopal Subramanium, learned Additional Solicitor General appearing on behalf of Appellant inter alia raised a contention that Indian Aluminium (supra) and consequently Tata Iron and Steel Co. Ltd. (supra) do not lay down a good law having regard to the fact that the classification of ‘dross’ under the Central Excise Tariff Act, has been changed. It is, thus, no longer a waste or scrap but would come within the purview of ‘ash and residue’. The learned Additional Solicitor General would submit that Indian Aluminium (supra) proceeded on the basis that dross was a waste material and it was not marketable, whereas in fact it is not only marketable but in fact contains high percentage and in some cases upto 78% of aluminium. It is the contention of the learned Additional Solicitor General that the value of dross is sometimes more than the value of the aluminium itself and, thus, it will come within the purview of the term “goods”.

6. Per contra, Mr. V. Lakshmikumaran, learned counsel appearing on behalf of Respondent, argued that dross is not a manufactured item. It may be a produce in the process of manufacturing but that by itself would not make it a manufactured product.

7. Chapter 26 of Central Excise Tariff deals with ores, slag and ash. Sub-heading 2620.00 of Heading 26.20 of the said Chapter reads as under :

“Heading Sub-HeadingDescription of goodsRate of duty

26.20 2620.00Ash and residues (other than from the 16%’’manufacture of iron or steel), containing metals or metal compounds)

8. Paragraph 3 of the Chapter Note states that the said Heading applies only to ash and residues of a kind used in industry either for extraction of metals or as a basis for the manufacture of chemicals compounds of metals.

9. Section XV of the Central Excise Tariff deals with base metals and articles of base metal. Note 8 defines waste and scrap to mean “metals waste and scrap from the manufacture or mechanical working of metal, and metal goods definitely not usable as such because of breakage, cutting-up, wear or other reasons. Chapter 76 deals with aluminium and articles thereof. `Aluminium, not alloyed’ is defined to mean metal containing by weight at least 99% of aluminium, provided that the content by weight of any other element does not exceed the limit specified therein. `Aluminium waste and scrap’ comes within the purview of Sub-Heading Nos. 7602.10 and 7602.90 of Heading 76-02 which read as under :

“Heading Sub-HeadingDescription of goodsRate of duty

76.02Aluminium waste and scrap

76.02.10Waste and scrap used within the Nilfactory of production for the manufacture of unwrought aluminium plates and sheets

76.02.90Others16%"

10. Expla

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2006 Supreme(SC) 917

IMPORTANT POINT Zinc dross and flux skimming are not excisable articles.

Cases Referred (3)

IMPORTANT POINT
Zinc dross and flux skimming are not excisable articles.