Per Jyoti Balasundaram:

The brief facts of the case are that the appellants herein are engaged in the manufacture of Aluminium and products thereof falling under Chapter 7 6 of the First Schedule to the Central Excise Tariff Act, 1985. During the course of manufacture of these products, aluminium dross, pot dug out material and furnace dug out material arise. The appellants were also availing of Modvat credit on the inputs of alumina and products thereof under Rule 57 A of the Central Excise Rules, 1944. Classification lists claiming nil duty exemption on these three items in terms of Notification No. 19/88 dated 1.3.88 as amended, were filed by the appellants. The said Notification stipulated that goods falling under Chapter 26 of the Schedule may be cleared at nil rate of duty provided that no credit of duty paid on the inputs used in the manufacture of the said goods has been taken under Rule 56 A or 57 A. Since the department was of the view that the appellants did not fulfill this condition as they had availed the benefit of Modvat credit on inputs used in the manufacture of aluminium dross, pot dug out material and furnace dug out material and cleared them without payment of duty, show cause notices .were issued proposing recovery of duty and imposition of penalty.

2. The appellants replied to the notices setting out the process of emergence of aluminium dross, pot dug out material and furnace dug out material. They contended inter alia that these items were not excisable goods and that the inputs on which Modvat credit was taken by them are... used in the manufacture of aluminium and products thereof and no input is used in the manufacture of aluminium dross, pot dug out material and furnace dug out material and hence they are not hit by the proviso to Notification No. 19/88. They also cited the judgement of the Hon'ble Bombay High Court in the case of Indian Aluminium Company Ltd Vs. A.K. Bandopadayay (1980 (6) ELT 146) wherein it was held that aluminium dross is not excisable and the judgement of the Hon'ble Supreme Court in the case of Swadeshi Polytex (1990 (44) ELT 794). The appellants also raised the plea of time bar in the demand for the period from 25.7.91 to 31.3.92 (Appeal No. E-3019/93-C).

3. The Adjudicating authority held that the items were excisable holding that all the three items are in the nature of residues of metal or metal compounds which are covered under Chapter Sub heading 2620.00 of the Tariff. He also relied upon the HSN Explanatory Notes to Chapter Heading 2620. As regards the case laws cited by the appellants, he held that these judgements were rendered in the context of the old Tariff and hence not applicable in the context of Central Excises Tariff Act 1985 in the purview of which the goods in question were excisable goods having distinct name, character and use and having commercial/industrial value. He also held that the appellants were not entitled to the benefit of Modvat credit due to nonfulfillment of condition prescribed in Notification No. 19/88 treating the three items in dispute as complete excisable finished products. He held that the extended period of limitation was available to the department as the appellants were guilty of suppression of declaration of the three disputed items as final products in which the inputs on which the credit was availed, were used. He therefore, confirmed the duty demands and imposed penalties as detailed below: