The enigma that is 'manufacture'

EXPERT EYE

The more we read about the judicial decisions on the concept of manufacture the greater is the chance of getting the "confusion worse confounded".

It is all about saleability and marketability and excisability and so on. The latest judgment in the case of CCE vs Tisco, 2004(165) ELT 386 (SC) says that zinc dross is not marketable though it is sold in the market.

It says further that even rubbish can be sold in the market but that is not marketable goods. This judgment depended heavily on another judgment of the same court in the case of UOI vs Indian Aluminium reported in 1995 (77) ELT 268 (SC).

With these judgments certain norms for determining the marketability of goods given by the Supreme Court itself previously in an array of judgments have been upset. We may examine this in greater details now.

The Tisco judgment is against the grain of various other judgements, namely, the following:

(i) Khandelwal Metal vs. UOI -1985 (20) ELT 222 (SC) In this landmark judgment about brass scrap, the Supreme Court held that the brass scrap of the kind imported by the appellants is a by-product of the manufacturing process. Such goods can and do come into existence as waste articles or rejected articles during the process of manufacturing that calls of articles. Indeed, brass scrap is known in commercial parlance by that name and is excisable as such.

The Indian Aluminum judgment has distinguished the case of dross and skimming from the judgment in the case of Khandelwal Metal. This distinguishing is based on wrong factual position.

At para 25 of this judgment, it has been said that "dross and skimming are not waste and scrap but ash and impurity and contain only a small percentage of metal, which it may or may not be economical to extract, but its presence results in dross and skimmings being sold for a small price".

This is exactly the basis of the factual error in this judgment. Dross has not only 90% to 92% content of metal and is also sold at 87% of the price of the prime metal . Dross, in fact, is not at all comparable to ash or impurity but to waste and scrap and byproduct. It is not rubbish.

(ii) CCE vs Rattan Micro 1996 (87) ELT 334 (SC)
This judgment has proceeded on the basis, accepted by both the parties, that zinc ash is dutiable. The issue was only about the dutiability of the subsequent manufacture out of it.

(iii) 1991 (52) ELT A073 SC in the case of CCE vs SKC Dye Staff
In this case the issue was about the classification of the zinc ash and not dutiability. The case was rejected as time barred but it is a relevant case as the dutiability of zinc ash was taken for granted.

(iv) 2005(184) ELT 128 (SC) "" Gujarat Nermada Valley Fert. Co Ltd vs Collector of Ex & Cus In this judgment the Supreme Court has held about intermediate chemicals, namely, Diethyl Chloro Acetanilide (DECA) and Chloro Methyl Butyl Ether (CMBE) formed in process of manufacture of Butachlor that they are not having sufficiently long shelf life and so they are not marketable.

(v) 1999 (114) ELT 786 (SC)""Collector of Central Excise, Kanpur vs Gayatri Glass Works

In this judgement the Supreme Court has held that Molten and broken glass (Bhagar) arising at the stage of final manufacture of glass is excisable.

With all these judgments holding that waste or scraps are marketable, the Tisco judgment is not in consonance. So to avoid any conceptual confusion, a definition of aluminium or dross should be incorporated in the relevant chapters that the generation of aluminium and zinc dross in the process of vulcanisation etc is manufacture. This only can settle the issue.

The author is a former member of the Central Board of Excise & Customs smukher2000@yahoo.com