STEEL AUTHORITY OF INDIA LTD. versus COLLECTOR OF CENTRAL EXCISE, BOLPUR

Citation: [1997] 2 S.C.R. 291 · Decided: 20-02-1997 · Supreme Court of India · Bench: S.P. BHARUCHA · Disposal: Appeal(s) allowed

Cited by 1 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

STEEL AUTHORITY OF INDIA LTD. 
A 
v. 
COLLECTOR OF CENTRAL EXCISE, BOLPUR 
FEBRUARY 20, 1997 
[S.P. BHARUCHA AND S.B. MAJMUDAR, JJ,] 
B 
Central Excises and Salt Act, 1944 r/w Central Excise Tariff, T.l. 25, 
26 and 26AAA-Excise duty 011 pig iron embedded in duty free by-product 
steel melting scrarr-Appellant with pemiission of autholities fallowing 'the C 
later the better' p1inciple-Not paying duty on pig iron captively used but on 
final product steel ingots-Appellant not availing set off of duty payable on 
pig iron-Departmmt demanding duty p~yable on pig iron embedded in by-
product, duty-free steel melting scrap-fl eld, per curiam, the demand was 
illegal; department cannot recover duty twice on pig iron used captively in 
manufacturing steel ingots giving rise to steel scrap, a by-product fully exempt D 
from excise duty. 
With the permission of the authorities, the appellant, which 
manufactured steel using a composite combined process of producing and 
then captively consuming pig iron as an input, followed for a large number 
of years, 'the later the better' principle. Thus, the appellant did not pay E 
duty on pig iron captively consumed but paid duty on the final product, 
steel ingots, without availing the set off of the duty payable on the pig iron 
consumed. The steel melting scrap, which emerged as a by-product, was 
fully exempt from payment of excise duty. 
The Department demanded from the appellant the duty payable on 
iron used in the manufacture of the steel melting scrap foi: the period 
December 12, 1977 to September 30, 1980 as well for the period April to 
F 
October, 1981. The Collector of Central Excise confirmed the demand. The 
0 
Tribunal upheld the demands for the period six months prior to the date G 
of the notices and quashed the demands for the earlier period as being 
time barred. 
Allowing the appeal, this Court 
HELD: (per curiam) 
H 
291 
292 
SUPREME COURT REPORTS 
[1997] 2 S.C.R. 
A 
1.1. The demands of duty on the supposed embedded input of pig 
iron which resulted into the steel melting scrap were clearly unauthorised 
and incompetent. [304-C] 
1.2. The notices sought to equate total quantity of steel melting scrap 
with the embedded proportionate input of pig iron. This was clearly imper-
B missible. In the absence of relevant data being produced by the department 
it was impossible to bifurcate to find out as to what part of the input to pig 
iron resulted into the manufacturing of steel ingots and which in the emerg-
ing by-product or steel melting scrap. The process for manufacturing steel 
ingots by utilising the input of crude iron being a single uniform one, such 
C bifurcation even othe~se was not possible. [300-D, A) 
D 
1.3. The demands resulted in seeking to recover excise duty twice on 
the input of pig iron utilised by the appellant in manufacturing the final 
product of steel ingots and which in the same process as a by-product gave 
rise to steel scrap which was fully exempted from excise duty. [303-B) 
Mis. Swadeshi Polytex Limited v. Collector of Central Excise, [1990) 2 
SCC 358; Union of India v. Indian Aluminum Co. Ltd., [1995) Supp 2 SCC 
465, distinguished. 
1.4. For a decision on the question of refund of duty the case would 
E stand restored to the file of the Collector of Central Excise, Bolpur. [304-E] 
Per Bharucha, J. (Supplementing) : 
By reason or the use of "the later the better" principle, with the 
concurrence of the excise authorities, the assessee could not be placed in 
F a position mode disadvantageous than it would have been had it not 
followed that principle. It could not be asked to pay excise duty on some 
theoretical proportion of pig iron that had not been used in the manufac-
ture of steel ingots but had come out, incidentally, as steel scrap. [305-C] 
G 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2766 of 
1991. 
From the Judgment and Order dated 21.12.90 of the Customs Excise 
& Gold (Control) Appellate Tribunal, New Delhi in E/11/91-BI. 
H 
V. Sridharan, R. Nambirajan, Sunil Jain and Vijay Hansaria for the 
-
STEELAUTIIORITY OF INDIA LTD. v. COLLECTOR OF C.E. (S.B. MAJMUDAR, J.] 293 
Appellant. 
A 
Dr. R.R. Mishra, V.K. Verma and S.P. Aggarwal for the Respondent. 
The Judgment of the Court was delivered by 
S.B. MAJMUDAR, J. This appeal under Section 35(L) of the Central B 
Excise & Sale Act, 1944 (hereinafter referred to as 'the Act') is brought 
by the appellant-assessee on being aggrieved by the decision rendered by 
the

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