A.J.F. D'Souza, Member (T)

1. The revision application dated 1st September, 1981, under Section 36 of the Central Excises and Salt Act, 1944, against Order-in-Appeal passed by the Appellate Collector of Customs and Central Excise, Madras, has been transferred to the Tribunal by the Government of India for disposal as an Appeal in terms of Section 35P(2) of the said Act.

2. The appellants import tungsten wire and molybdenum wire of a higher micron size and draw them to finer sizes, which are supplied as such, as also transferred to their own coiling plant, for being converted into filaments. While drawing the wire, it breaks into pieces which are collected periodically and disposed of as scrap. The appellants say that by a mistake of law they filed a classification list dated 6th September, 1979, classifying these broken pieces as a commodity falling under T.I. 68, CET. On 12th November, 1979, a refund claim was filed as the duty paid from 22-12-1977 to 18-7-1979 was not warranted under law. The Assistant Collector, by his order dated 19-8-1980, held that scrap is necessarily something detached and the conclusion is that it should retain all the characteristics of the original product from which it was detached, except physical form. From this angle, the scrap in question, is not scrap in the strict sense, as it does not retain the characteristics of the original product. Even according to the manufacturer, this scrap arises at different stages and at these stages, the product cannot be called the original raw material. It is, therefore, different from the original product and has to be treated as a manufactured product. It thus satisfies the test laid down by the Supreme Court and the recovery of duty was in order. He, therefore, rejected the refund claim. Before the Appellate Collector, the appellants pleaded that there was no manufacture within the meaning of Section 2(f) and also relied on order No. 513-B of 1980 dated 26-9-1980 (Cen-Cus November 80, page 681-D) where the Government of India held that scrap was not goods. The Appellate Collector found that the scrap in question is not the cut ends or unusable bits of the raw materials but are by-products and are bought and sold for use in brushes, etc. He, therefore, agreed that they were liable to duty under T.I. 68 and rejected the appeal.

3. In the present appeal, it is contended that the wire drawn is only finer in size and there is some change in form, without any change in the basic characteristics. The Supreme Court had laid down that for purposes of manufacture, there should be a transformation into a new and different article having distinct name, character and use. None of these ingredients is satisfied in the present case. The Appellate Collector failed to appreciate that such broken bits are only called rejects/scraps/throwaways in the trade. His finding that the broken bits were obtainable during the process of manufacture more or less as by-products is quite erroneous. When wire drawing and coiling is not manufacture and the product is not subjected to duty, the broken pieces will also be outside the purview of excise; In Pio Food Packers (1980 ELT 343 SC), it was held that slicing and canning of pineapple cannot amount to manufacture. In Sandoz (India) Ltd. [1980 TLR 2332, Bombay] it was held that mere change in form or improving of quality does not amount to manufacture. 'Similarly, processing of 330 Saccharin for conversion to 550 Saccharin was not held to be manufacture since the product remains Saccharin. It may be Correct that these broken parts are sold for several uses in brushes etc., but as Hon'ble Lentin J. observed : "any rubbish can be sold, but that is not the criterion. It cannot be said that the dross and skimmings are transformed resulting in new and different article with distinctive name, character and use so that they ordinarily come to the market to be bought and sold and are known to the market". In the present case, the broken bits are