R.M. Sahai, J. - (1.) The only dispute that arises for consideration in these appeals directed against the Order of Central Excise and Gold (Control) Appellate Tribunal is whether scrap obtained by the appellant in course of manufacture of iron and steel and steel products was dutiable under Item 26 or 26 AA of the Tariff Schedule.
(2.) Since facts are not in dispute, and the duty is sought to be levied on scrap obtained by the appellant in course of manufacture of iron and steel products and supplied by it to M/s. Tata Yodogawa Ltd. on payment of duty for conversion of scrap into ingots after re-melting which was actually re-melted and re-used by the appellant as ingot, it is appropriate to extract the two entries relating to steel ingots and iron or steel products : "26.--Steel Ingots includ- Rs. 100 per ing Steel melting Scrap metric tonne" "26AA. - Iron or steel products, the following namely :- (i) Semi-finished Rs. Three hundred steel including and fifty per met- blooms, billets, ric tonne slabs, sheet bars, tin bars and hoe bars. (ii) to (v)********** Item 26 levies duty on raw material. In commercial parlance steel ingots are used for producing steel products. Raw melting scrap serves the same purpose. Item 26AA deals with iron and steel products. What are those products is mentioned in Clauses (i) to (v) of the item. These appeals are concerned with the scope of clause (i). It deals with semi-finished steel. A semifinished product is one which requires some further work or treatment to become serviceable. But it cannot apply to scrap as it is normally understood as something which is not serviceable. Even the Tribunal held that scrap produced by appellant, did not strictly answer to the description but they can resemble or closely resemble them. qualifying to be called sub-standard blooms or slabs or bars or channels. But a sub-standard article is not scrap as understood in commercial parlance or trade circle. Two reasons have been given by the Tribunal for including scrap of iron and steel in Item 26AA - one, price circular issued by Controller of Iron and Steel classifying scrap into industrial, re-rolling and melting scrap and fixing different rates for each and other the size of scrap. The Tribunal held that even though scrap sold by the appellant to M/s. Tata Yodogawa Ltd. was melted to produce ingots but that was not determinative of its character as what was melted was not melting scrap because of its size, therefore, it did not attract levy under Item 26 but under Item 26AA being something like sub-standard goods.
(3.) When the matter was pending in appeal the Assistant Collector of Central Excise wrote a letter to the Director of Inspection (Metallurgical, Jamshedpur, requesting him to give his views whether the scrap sold by the appellant under agreement to different parties for manufacturing steel ingots out of the scrap could be described as re-melting scrap as the Department on examining the invoices found that maximum length of such scrap of various products like rails, billets, plates, lee, channels, angles, beams etc. were only up to 1.5 meters and such scraps, according to Iron and Steel Controllers specification of 1959, could not be classified as re-melting scrap. This letter was replied by the Director and it was mentioned that from the letter sent by the Assistant Collector it appeared that the size and dimension of the scrap was taken as the sole yardstick for classification and, if that be the case then the classification of scraps solely on the basis of size factor can hardly be considered a very rational classification. The Director further was of the opinion that, the steel manufacturing operations generate scrap which is in turn re-used not only in the steel making process but also in plant furnaces and cupolas. This scrap is called process scrap or "arisings" of steel mills. Cuttings of rails, billets, plates, axles, channels etc. supplied to M/s. Tata Yodogawa Ltd. are arisings of TISCOs mills. These scraps (process scrap) are usually treated as melting scraps in developed countries as well as in India. There are different grades of melting scrap - heavy, medium and light. He further observed that the technology has changed and in view of the developments in iron and steel industry the size factor could not always be main criterion for the classification of steel scraps.;