Case Law Details
Tata Motors Limited Vs Commissioner of Central Excise (CESTAT Mumbai)
Conclusion: Excise duty shall not be imposed on the generation of aluminum dross and skimming in the manufacture of aluminum castings/parts of motor vehicles.
Held: The issue arose for consideration was whether the aluminum dross and skimming arising out of the manufacture of aluminum motor vehicle parts amounted to manufacture and liable to duty or otherwise. Revenue contended that the above activity amounted to manufacture and therefore, liable for payment of excise duty. It was held that zinc dross and zinc scalling were not goods, hence not excisable. In view of judgments particularly in the case of Hindalco Industries Ltd v. Commissioner of Central Excise, BBSR-II [2019 (4) TMI 1458 – CESTAT KOLKA TA] which was upheld by the Hon’ble Supreme Court, the issue was no longer res Integra. Hence the generation of aluminum dross and skimming in the manufacture of aluminum castings/parts of motor vehicles did not amount to manufacture. Accordingly, it was not liable to duty.
FULL TEXT OF THE CESTAT MUMBAI ORDER
The issue involved in the present case is that whether the aluminium dross and skimming arising out of the manufacture of aluminium motor vehicle parts amounts to manufacture and liable to duty or otherwise. By the impugned order, Learned Commissioner (Appeals) dropped the demand for the extended period against which Revenue filed appeal No. E/862/2012 and the assessee filed appeal No. E/819/2012 against confirmation of demand for the normal period.
2. Ms Payal Nahar, Learned Counsel appearing on behalf of the appellant, submits that the demand was confirmed invoking explanation to section 2(d) of Central Excise Act, 1944 which was inserted with effect from 01/05/2008 on the allegation that aluminium dross is excisable goods, therefore, liable to duty. She submits that the issue, even after considering the amended provision under Section 2(d) of Central Excise Act, 1944, various judgments have been passed whereby it was held that aluminium dross and skimming are not liable to duty. She relies upon the following judgments.
i. Hindalco Industries Limited v. Union of India [2015 (315) ELT 10 (Bom.) affirmed by apex Court reported at [2019 (367) ELT A246]
ii. Balrampur Chini Mills Ltd v. Union of India [2014 (300) ELT 371 (All.)]
iii. Union of India v. DFSCL Sugar Ltd [2015 (322) ELT 769 (SC)]
iv. Hindalco Industries Ltd v. Commissioner of Central Excise,, BBSR-II [2019 (4) TMI 1458 – CESTAT KOLKA TA]
v. Honda Motorcycle & Scoter India Pvt Ltd v. Commissioner of Central Excise, Gurgaon [2017 (3) TMI 638 – CESTAT CHANDIGARH]
vi. KEC International Ltd v. Commissioner of Central Excise, Nagpur [ 2016 (342) ELT 418 (Tri. -Mumbai)]
3. Learned Authorised Representative Shri N N Prabhudesai reiterates the findings in the impugned order.
4. We have carefully considered the submissions of both sides and perused the records. Revenue’s contention is based only on explanation inserted to section 2(d) of Central Excise Act, 1944 whereby it was interpreted that as per this amendment any product arising in the course of manufacture would be liable to duty. We find that there is no dispute prior to 2008 amendment. In the various judgments even after considering the amendment section 2(d) to Central Excise Act, 1944 it was held that no duty liability arise on the aluminium dross skimming generated unavoidably during the manufacture of aluminium products. The said judgments and relevant orders are reproduced below:
5. In Hindalco Industries Ltd (supra) it was held
“19. Mr. Sridharan then placed reliance upon the Judgment of the Hon’ble Supreme Court in the case of Commissioner of Central Excise v. Tata Iron and Steel Co. Ltd. (supra). There, again the Hon’ble Supreme Court was required to examine the issue as to whether zinc dross, flux skimming and zinc scallings arising as by-product during galvanization of steel sheets are excisable goods. In that regard, paras 9, 10, 14 and 16 of this decision are relevant. They read as under :
“9. According to the Department, prior to 1-3- 1988 as per Chapter Note 3 of Chapter 26 ash and residue other than dross and ash of zinc containing metals or metallic compounds applies only to the ash and residue of a kind used in industry either for the extraction of metal or as a basis for the manufacture of chemical compound of metal. This chapter note was subsequently amended w.e.f. 1- 3-1988 by omitting the words “other than dross and ash of zinc containing metals of metallic compounds”. Thus, prior to 1-3-1988 the said dross and ash of zinc containing metals or metallic compound were classifiable under 7902 and subsequent to 1-3-1988 the said product got classified under sub-heading 26.20.
10. Here also a show cause notice was issued and the Assistant Commissioner rejected the refund claim holding that the ash cleared by the noticee (assessee) contains metals and oxide of zinc and the same is also used for the extraction of metal as a basis for the manufacture of chemical compounds of metal and they are marketable and also answer of the description of chapter heading.
Therefore, they contended that the same is correctly classifiable under Chapter Heading No. 26.20 of the Central Excise Tariff Act, 1985. The assessee’s appeal before the Commissioner was also rejected and the further appeal by the assessee before the CEGAT was allowed relying on the judgment of this Court in Indian Aluminium Co. Ltd. (supra). The Tribunal, following the judgment of this Court, categorically held that zinc dross and zinc scalling are not goods, hence not excisable.
14. On the above pleadings and of the arguments, the following questions of law may arise for determination of this Court.
The issue which arises for consideration is that whether zinc dross and flux skimming arising during galvanisation of steel sheets are goods within the meaning of the Central Excise Act, 1944 and are liable to central excise duty as classified by the Revenue.
OR
Whether zinc dross and flux skimming are waste products in the process of galvanisation of steel sheets and are not goods under the Central Excise Act, 1944 as claimed by the assessee.
16. We are of the opinion that the dross and skimming are merely the refuse, scum or rubbish thrown in the process of manufacture of aluminium sheets and, therefore, cannot be said the result of treatment, labour or manipulation whereby a new and different article emerges with a distinctive name, character or use which can ordinarily come to the market to be brought and sold. Merely because such refuse or scum may fetch some price in the market does not justify it being called a byproduct, much less an end-product or a finished product.”
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