Sahab Singh
These are two appeals. First appeal No. E/359/10 is filed by M/s Bhushan Steel Ltd. (hereinafter referred to as appellants) against the Order-in-Original No. 03-04/SR (03 to 04)COMMR/RGD/ 09-10 dated 08.12.2009 and second appeal No. E/369/11 is filed against Order-in-Appeal No. YDB/844/RGD/2010 dated 8.12.2010.
2. The brief facts of the case are that the appellants are engaged in the manufacture of excisable goods falling under Chapter 72 of the Central Excise Tariff Act, 1985. For payment of the Central Excise duty, they are availing CENVAT Credit of duty paid on inputs, capital goods and input services under the provisions of Cenvat Credit Rules, 2004. On the scrutiny of ER-1 returns filed by the appellants with the Range Superintendent, it was observed that the appellants had manufactured Zinc Dross slabs/ingots and cleared the same without payment of duty. It was further observed from the scrutiny of the invoices under cover of which Zinc Dross slabs/ingots in question were being cleared by the appellant that the same bore an endorsement to the effect that the said goods were non-excisable. The appellants are engaged in manufacturing of Galvanized Plain Sheets/Coils out of the cold rolling of the H.R. Coils and C.R. Coils, which are then subjected to the process of galvanization. During the process of galvanization of C.R. Coils, the molten solution of pure Zinc chemically reacts with steel strips resulting in a separately identifiable new and distinct by-product known as Zinc Dross which is then converted into slabs of about 20 Kgs and marketed by the appellant. Two show-cause notice dated 7.1.2008 and 5.1.2009 were issued to the appellant for the period from December, 06 to November, 07 and December, 07 to August, 08, alleging that Zinc Dross manufactured by the appellant is classifiable under Chapter 79 of the Tariff and the process is a manufacturing activity under Section 2(f) of the Central Excise Act and the goods are therefore liable to Central Excise duty. Accordingly, the show-cause notices were confirmed by the Commissioner of Central Excise vide the impugned order dated 8.12.2009 and another show-cause notice dated 7.9.2009 was issued to them for the period 1.9.2008 to 6.3.2009 which was confirmed by the Addl. Commissioner on 24.3.2010. Against this Order-in-Original passed by the Addl. Commissioner, the appellant filed an appeal before the Commissioner (Appeals) who vide the Order No. 844/2010 dated 8.12.2010 rejected the party’s appeal and the appellants are before this Tribunal against the Order-in-Original passed by the Commissioner dated 8.12.2009 and Order of the Commissioner (Appeals) dated 8.12.2010.
3. The learned Advocate appearing for the appellant submitted that the lower authorities have erred in passing the impugned order without considering and appreciating the provisions of law. He submitted that the contention of the Commissioner that specific entry for Zinc Dross w.e.f. 28.2.2005 would make the disputed product excisable and hence, the ratio of judgment relied upon by the appellants would not apply, is not correct. He submitted that the process undertaken by the appellant is identical process involved in the case of Commissioner of Central Excise, Patna Vs. TISCO - 2004 (165) ELT 386 (SC) wherein it was held that Zinc Doss arising as a by-product during the galvanization is not the excisable goods. He further submitted that even the decision in the case of Commissioner of Central Excise Vs. Indian Aluminium Co. - 2006 (203) ELT 3 (SC) would squarely apply to the present case wherein the Hon'ble Supreme Court has held that Dross and skimming arise during manufacture but process therein not amounts to manufacture. Hence, the same are not liable to duty. He submitted that although Zinc Dross is sold, but the activity undertaken does not amount to manufacture. Hence, the duty is not payable. To attract duty, he submitted that the article should be goods which should have come into existence as the result of manufacture. Therefore, the Zinc Dross does not fulfill these conditions and hence is not liable to duty. He submitted that in the case of Vishal Pipes - 2010 (255) ELT 532 (Tri-Del) even for the period after the amendment in the Tariff, it has been held by the Tribunal that Zinc Dross is not excisable. He also relied on the Tribunal’s decisions in the case of Uttam Galva Steels Ltd. vide Order No. A/637-638/11/EB/C-II dated 30.6.2011 and M/s Slugs India Ltd. vide Order No. A/779/11/EB/C-II dated 18.8.2011 in support of his contention.
4. Learned Commissioner (A.R.) appearing for the Revenue submitted that the Zinc Dross is a excisable product as it is specifically mentioned in the Central Excise Tariff and appellants are selling the goods in the form of Zinc Dross Slabs/ingots, which is a marketable commodity, hence attract excise duty. He referred to para 38 of the adjudication order passed by the Commissioner on 8.12.2009 where the process undertaken by the assessee has been explained wherein the whole chain of processes are carried out on H.R. Coils to convert into G.P. Coils/sheets and finally into Zinc Dross slabs. He also referred to para 41 and 42 of the Order-in-Original, wherein the Commissioner has examined the manufacturing activity whether the process undertaken by the assessee amounts to manufacture or not? He relied upon the following decision in support of his contention that Zinc Dross is a manufactured item and hence liable to duty: -
(i) Kores India Ltd. Vs. Commissioner of Central Excise, Chennai - 2004 (174) ELT 7 (SC)
(ii) Pratappur Sugar and Industries Ltd. Vs. Assistant Collector - 1992 (58) ELT 452 (All)
(iii) CEAT Ltd. Vs. Commissioner of Central Excise, Nashik vide Order No. A/508-510/11/EB/C-II dated 5.4.2011
(iv) Commissioner of Central Excise, Lucknow Vs. WIMCO Ltd. - 2007 (217) ELT 3 (SC)
(v) Hindalco Industries Ltd. Vs. Union of India - 2009 (243) ELT 481 (All.) 5. After hearing both sides, we find that the issue involved in these appeals is as to whether the Zinc Dross arising as a by-product during the process of galvanization is a manufactured product and liable to Central Excise duty. We find that this Tribunal had taken a view that Zinc Dross arising in the process of galvanization is not a manufactured product vide Order No. A/637-638/11/EB/C-II dated 30.6.2011 in the case of Uttam Galva Steel Ltd. and Order No. A/779/11/EB/C-II dated 18.8.2011 (supra) in the case of Slugs India Ltd.
6. It is contention of the Revenue that amendment has been made in Tariff in March, 2005 to specifically cover the Zinc Dross under Chapter 79. It is further contended by the Revenue that definition of ‘Excisable goods’ under Section 2(d) has also been amended w.e.f. 10.5.2008 by adding an explanation as under: -
“Explanation: - For the purposes of this clause, ‘goods’ includes any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.”
It is the submission of the Revenue that in view of specific entry in Tariff and amendment in definition of ‘Excisable goods’ Zinc Dross is excisable goods.
7. We find that excisability of Zinc Dross was examined by this Tribunal in the case of Vishal Pipes (supra) for the period after both the amendments of 2005 and 2008 as period of demand in that case was March, 2005 to October, 2008. We also find that Tribunal in the case of Vishal Pipes (supra) relying upon the decision of the Hon'ble Supreme Court in the case of Indian Aluminum Co. Ltd. (supra) and TISCO (supra) has taken a view that Zinc Dross is not excisable goods. We, therefore, following the decision of coordinate Benches hold that Zinc Dross cleared by the appellant is not excisable product and hence not liable to duty. Accordingly, the Order-in-Original and Order-in-Appeal are set aside and the appeals are allowed.