EXCISE Appeal No. 11478 of 2013-DB

[Arising out of Order-in-Original/Appeal No 187-2013-RAJ-CE-AK-COMMR-A-AHD dated

26.04.2013 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-RAJKOT]

 

Mitesh Impex

VERSUS

C.C.E. & S.T.-Rajkot

WITH

EXCISE Appeal No. 11479 of 2013-DB

[Arising out of Order-in-Original/Appeal No 186-2013-RAJ-CE-AK-COMMR-A-AHD dated

26.04.2013 passed by Commissioner of Central Excise, CUSTOMS (Adjudication)-RAJKOT]

Rajhans Impex Pvt Ltd

VERSUS

C.C.E. & S.T.-Rajkot

APPEARANCE:

Shri P. V Sheth, Advocate for the Appellant

Shri. Prakash Kumar Singh, Superintendent (Authorized Representative) for the

Respondent

CORAM: HON’BLE MEMBER (JUDICIAL), MR. RAMESH NAIR

HON’BLE MEMBER (TECHNICAL), MR. RAJU

FINAL ORDER NO.A / 10224-10225 /2023

DATE OF HEARING:23.01.2023

DATE OF DECISION: 07.02.2023

RAMESH NAIR

The fact of the case is that the appellant herein are 100% export

oriented unit and engaged in manufacture of Brass articles. During the

relevant period the appellant had imported Brass Metal scrap containing

other impurities without payment of duty under Notification 52/2003-cus

dated 31.03.2003 as the said scrap, after receipt, segregated into

foundry and non-foundry scrap. The foundry scrap is used in

manufacturing of brass products. Whereas non foundry scraps containing

other impurity was sold. The case of the department is that one the non

foundry scrap cleared by the appellant is un manufactured goods and

liable to custom duty on its clearance and on other after the allowance

of 2% scrap over and above the 2% scrap is also liable to custom duty.

2. Shri Paresh V. Sheth, Learned Counsel appearing on behalf of the

appellant at the outset submits that the very same issue has been

considered by this Tribunal in the Bunch of cases vide A/11068-

11093/2018 dated 09.02.2018, whereby both the issues have been

decided in favour of the assesse. This order of the Tribunal was

challenged by the revenue before the Hon’ble High Court of Gujarat.

However, the revenue’s appeal was dismissed by the High Court and the

same was accepted by the department. He further submits that

considering the above legal status of the case on the issue even in

appellant’s own case the jurisdictional Commissioner vide order No. RAJ

EXCUS-000-COM-14 to 20-18-19 dated 26.03.2019 dropped the

proceeding. Accordingly, the issue is no longer res integra.

Shri Prakash Kumar Singh, Learned Superintendent (Authorized

Representative), Shri Tara Prakash, Learned Deputy Commissioner

(Authorized Representative) appearing on behalf of the revenue

reiterates the finding of the impugned order.

We have carefully considered the submissions made by both the

sides and perused the records. We find that the very same issue has

been considered by this Tribunal in the case of Meridian Impex Vs. CCE.

& S.T.- Rajkot vide Final Order No. A/11068-11093/2018 dated

09.02.2018, wherein the Tribunal has passed the following order:

“10.

we find that as far as the question for

determination, whether the activity of segregation of

imported mixed brass scrap into foundry and non-foundry

grade, amounts to manufacture or otherwise is concerned,

itis now more or less covered by the recent Circular of Board

dated 10/05/2016. The said Circular is a clarification on the

issue of segregation of impurity, namely ,iron, steel, rubber,

plastic, dust etc. from honey grade brass scrap imported,

albeit in the context of Rule 3(5)of CENVAT credit rule 2004,

but definitely applicable to the present case. It is clarified as

follows:

“3. The issue has been Segregation from honey grade scrap

in order to weed out other foreign materials before the

process of melting in the furnace is an essential process

relating to manufacture of brass articles. The foreign

materials, emerging during the process of segregation have

to be treated as process waste and cannot be treated like

removal of inputs as such. The segregated foreign material

has an altogether different character and use vis-à-vis brass

scrap. Value per unit and classification of the segregated

foreign material is also different from that of imported brass

scrap. Accordingly, clearance of foreign material such as iron,

steel, rubber, plastic, dust etc. cannot be treated as clearance

of inputs as such. It may be noted that circular No. 62 /2001

–CUS dated 12/11/2001 does not apply tothe issue at hand

as the facts at hand are different.

4. in view of above, it is clarified that the clearance of

segregated foreign materials namely iron, steel, rubber,

plastic, dust from honey grade brass scrap before feeding

in the furnace cannot be treated as removal of “inputs as

such” as envisaged under Rule 3 (5)of CENVAT credit

Rules, 2004. The segregated foreign material in such

situation, as has been explained above, shall be cleared on

payment of Central Excise duty on transaction value as per

its appropriate classification and rate of dutydetermined

on merits.”

11.From the above clarification, it is clear that after

segregation of themixed imported scrap, the segregated

scrap, if cleared, cannot be considered as clearance of

“inputs as such”. In other words, the segregation activity is

a part of manufacturing of brass articles from the imported

mixed brass scrap, consequently, the demand of customs

duty on the clearance of segregated non-foundry scrap in

DTA, considering the same as that of imported scrap and

clearance “as such”, is unsustainable in law. The earlier

clarification issued in the year 2001, in the context of import

of plastic scrap may not relevant also, it is contraryto the

principle of law laid down in relation to the meaning of

“manufacture” by the judiciary in a series of cases. The

Hon’ble SupremeCourt in the case of CCE Vs. Rajastan

Chemical works 1991 (55) ELT 444(SC) observed as follows:

“16. A process is a manufacturing process when it brings out

a complete transformation for the whole components so as to

produce a commercially different article or a commodity. But,

that process itself may consist of several processes which may

or may not bring about any change at every intermediate

stage. But the activities or the operations may be so integrally

connected that the final result is the production of a

commercially different article. Therefore, any activity or

operation whichis the essential requirement and is so related

to the further operations forthe end-result would also be a

process in or in relation to manufacture to attract the relevant

clause in the exemption notification. In our view, the word

`process’ in the context in which it appears in the aforesaid

notification includes an operation or activity in relation to

manufacture.”

12. Therefore, the process of segregation of imported

mixed brass scrap, into foundry and non foundry grade by

weeding out the impurities so as to prepare it or make it

suitable to feed into the furnace for manufacture brass

ingots, and then finished goods, in our view is a process

integrally connected to the manufacture of brass articles.

Besides, this Tribunal in the case of Singh scrap Processor

Ltd. Vs, Commissioner of C.Ex. 2002 (143) ELT 619(Tri.-

Mumbai) held the process of removal of impurity results

into manufacture. Accordingly, the non-foundry scrap

cleared in DTA on payment of excise duty, cannot be

construed clearance of imported scrap ‘as such’.

13.On the issue of payment of duty on the excess

use/consumption scrap material, in the activity of

segregation/manufacture of finished goods, then the norms

fixed by the norms committee or mentioned in the

Notification, as the case may be, we find that the Ld.

Commissioner(Appeals), in his subsequent Orders, has

rightly referred toand relied upon clause (3) of the said

Notification. For better appreciation the said clause is

reproduced as below:

“3. Notwithstanding anything contained in this

notification, the exemption herewith shall also apply to

goods which on importation into India or procurement,

are used for the purpose of manufacture of finished

goods or services and such finished goods and services,

(including by-products, rejects, waste and scrap arising

in the course of production, manufacture, processing or

packaging of such goods) even if not exported, are

allowed to be sold in DomesticTariff Area in accordance

with the Foreign Trade Policy and subject to such other

limitations and conditions as may be specified in this

behalf by Development Commissioner, or the Board of

Approval or the Inter Ministerial Standing Committee, as

the case may be, on payment of appropriate duty of

excise leviable thereon under section 3 of the Central

Excise Act, 1944 ( 1 of 1944) or where such finished

goods (including by-products, rejects, waste and scrap)

or services are cleared to the warehouse appointed or

registered undernotification of the Government of India

in the Ministry of Finance ( Department of Revenue) No.

26/98-Central Excise (NT), dated the 15th July, 1998

or No. 46/2001-Central Excise (NT), dated the 26thJune,

2001 or cleared to the warehouse authorized to carry out

manufacturing process or other operation under section

65 of the Customs Act, 1962 (52 of 1962) and under the

Manufacture and Other Operations in Warehouse

Regulation, or cleared to the holdersof certificate from

Apparel Export Promotion Council and Council for

Leather Export for duty free imports as referred to in

clause (e) of the paragraph 6.9 of the Foreign Trade

Policy, without payment of duty :

14. Interpreting the said provision, the Ld. Commissioner

(Appeals) observed that even if the imported goods are used

in the manufacture of the finished goods (including by

products, rejects waste and scrap arising in the course of

production, manufacturing processing or packaging of such

goods) even if not exported, are allowed to be sold in DTA,

in accordance with the Exim Policy on payment of

appropriate excise duty leviable thereon, the exemption

Notification No. 53/ 2003– Cus. dated 31/03/2003 cannot be

denied. In the present case, the scrapgenerated during the

course of segregation/manufacture of brass articleshad been

permitted to be cleared in the DTA by the Development

Commissioner and the Appellant-assessee had cleared the

scrap pursuant to the said permission and discharged

appropriate excise duty on its sale. Hence, demanding

customs duty foregone on the excess quantity of imported

scrap worked out on the basis of the Norms fixed bythe

Committee, in our view, is not sustainable in law. We

summarize our findings as follows;

(i) The activity of Segregation of imported mixed brass scrap

into foundry and non-foundry grade, results into

manufacture, hence, the Revnue’s Appeals on this count fails,

accordingly, rejected.

(ii) The excess quantity of scrap generated during the activity

of segregation/manufacture of the Brass articles cleared on

payment of applicable excise duty in DTA as per the

permission of

Development commissioner, is covered by clause(3) of the

Exemption Notification 50/2003cus. Dt.31.3.2003, as

amended, and the respective Orders of the ld.

Commissioner(Appeals) which are passed on same line are

upheld and the Orders contrary to above, are set aside and

the Appeals filed by the respective,assesse-Appellants are

allowed .

Appeals are disposed off as above.

The above decision has been upheld by the hon’ble Gujarat High Court

by dismissing the revenue’s appeal. Moreover, the department has

accepted the Hon’ble Gujarat High Court order and subsequently dropped

the proceedings in various cases on the same issue. Accordingly the issue

is no longer res integra. Hence, the impugned orders are set aside

appeals are allowed.

(Pronounced in the open Court on 07.02.2023)

RAMESH NAIR

MEMBER (JUDICIAL)

(RAJU)

MEMBER (TECHNICAL)