CX - Processing of unprocessed stainless steel scrap into blended stainless steel scrap results into a new commodity known in commercial market by different name - activity is manufacture: AAR
By TIOL News Service
NEW DELHI, AUG 11, 2016: APPLICANT proposes to source different grades of steel scrap from the generating factories and approved vendors within India as well as outside India. The scrap so procured in such a variety of forms and grades is neither suitable for the foundries nor suitable for steel mills as a raw material for its manufacturing activity.
The different grades of metal scrap will then be identified from analyzing the collected steel scrap based on chemical composition test report issued by the third party lab and steel scrap will be segregated by manual process with the help of conveyor and overhead crane after analyzing process.
The process of blending is the term used to describe the up-valuation of random raw materials by mixing various Low manganese and High manganese scraps into homogeneous product i.e., High Manganese blending scrap, Low Manganese blending scrap and Re-use scrap that is as per customer specifications.
The baling process involves compacting the steel scrap into cube form for direct supplies into furnace.
This process of blending and baling is carried out by manual as well as mechanical process with the help of specially trained workers operating special purpose cranes and machines to carry out this operation along with skilled workmen and supervisors.
It eventually results into the production of blended metal scrap of the requisite grade.
Applicant further submits that the blending and other process as above, as per customer specifications, will bring into existence new goods, which inter-alia will be used as raw material in the foundries or in the steel mills for its manufacturing activity.
The following questions are, therefore,raised by the applicant before the Authority for Advance Rulings:
1. Whether processing of secondary raw materials (steel scrap of difference and variable composition) into blended steel scrap is liable for payment of Central Excise duty under the provision of the Central Excise Act, 1944?
2. Whether produced "blended metal scrap" can be classified under Chapter 72044900 of the Central Excise Tariff Act, 1985?
Revenue inter-alia submitted that the activity proposed does not have any essential difference in the identity between the original commodity and proposed article, as both would come under the category of scrap. Therefore, this process does not amount to manufacture as defined in Section 2(f) of the Central Excise Act or under Section or Chapter Note.
The Authority inter alia observed -
++ Though both (input and output) would fall under the category of scrap, but are completely different types of scraps. Further, processing of unprocessed stainless steel scrap into blended stainless steel scrap would result into input (unprocessed stainless steel) losing its identity and new commodity i.e. blended stainless steel scrap coming in existence.
++ Therefore, when said unprocessed steel scrap undergoes above process, a new product saleable in the market, which is having a distinct identity and use, comes into existence and is known in the commercial market by a different name. Further, blended steel scrap possesses higher utility than the unprocessed scrap steel.
++ Therefore, applicant's contention that the production of blended steel scrap by processing unprocessed scrap steel amounts to manufacture under the Central Excise Act, 1944, is correct.
The following decisions were relied upon while arriving at the above conclusion viz. Mamta Surgical Cotton Industries, Rajasthan Versus Assistant Commissioner (Anti- Evasion), Bhilwara, Rajasthan - 2014-TIOL-47-SC-CT, M/s ELG India Private Limited. - 2013-TIOL-02-ARA-CX.
In respect of classification of "blended metal scrap" under Chapter 72044900, Revenue did not oppose the same.
The Authority, therefore, passed the following ruling -
1. Processing of secondary raw materials (steel scrap of difference and variable composition) into blended steel scrap is liable for payment of Central Excise duty under the provision of the Central Excise Act, 1944.
2. Produced "blended metal scrap" can be classified under Chapter 72044900 of the Central Excise Tariff Act, 1985.
(See 2016-TIOL-17-ARA-CX)
