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Petitions Nos. 295, 296, 306, 308 to 313 of 1969; 108 and 109 of 1970, decided on 24th April 1970.

First Sched., item 25 [as amended by Finance Act (XII of 1967), S. 5(8)]---Smelting ---Process cannot take place until solid material heated to melting point and liquefied---Product obtained from iron scrap without heating it to melting point, held, not "steel ingots" produced by a process of smelting so as to become liable to excise duty.

The petitioners were carrying on the business of re-rolling of mild steel. Excise duty @ Rs. 50 per ton on the primary product "steel ingots" was imposed on them under item No. 25, First Schedule, Central Excises and Salt Act, 1944 as amended by the Finance Act, 1967. The petitioners contended that they did not produce "steel ingots" by the process of smelting as laid down in the Finance Act, 1967 and as such excise duty was not leviable upon their product. Iron, in the petitioners' Mills, was heated to such a degree that it became extremely softened, could easily be turned into any shape or form. The Excise Officer stated that iron in petitioners' Mills is heated to such a degree that it becomes extremely softened and is malleable. It was admitted that it was neither a hard substance nor liquid in that state and the new product was then turned into steel ingots.

Held : Smelting involves melting and melting can take place only if a solid material is heated to such an extent and degree that it becomes a liquid. To "melt" means to become liquified by heat. In the present case it is admitted that iron-scrap at the petitioners' Mill never reaches the state of its being a liquid. This turning point is never reached. Clearly, therefore, the petitioners cannot be said to have adopted the process of smelting described in the Act for the manufacture of the produce "steel ingots" so as to become liable to excise duty introduced by the Finance Act.

Khalid M. Ishaque for Petitioners.

S. J. Alam for Respondents.

Dates of hearing : 16th and 24th April 1970.

-These petitions were heard together as common questions of law arising out of almost similar facts are involved. The case of the petitioners is that they carry on business of re-rolling of mild steel and pay excise duty thereon at Rs. 25 per ton under item No. 25 of the First Schedule to the Central Excises and Salt Act, 1944. By Finance Act, 1967, the Excise duty was imposed on the primary product "Steel Ingots" at the rate of Rs. 50 per ton, with the other commitments like sales tax, defence, surcharge, etc., "Steel Ingots", according to the definition given in the Act, "means the primary product obtained by smelting iron ore, pig iron, iron-scrap or any other ferrous raw material whether cast in the mould in any shape or form, or whether used in molten or semi finished state for the manufacture of rolled or forged steel products."

The contention of the petitioners is that they do not produce steel ingots" by the above process, and in fact they do not even have arrangements for the smelting of iron-scrap; the levy and the demand of Excise duty from them is, therefore, without lawful authority.

The sole question that is to be determined in these cases, therefore, is whether the petitioners are manufacturing "steel ingots" by the process described in the Finance Act, 1967.

In order to resolve this controversy, it was agreed that the Departmental Officer conversant with the facts be examined in Court to describe the process by which the petitioners obtain "steel ingots" in their Mills.

Mujib Ahmed Ansar, the Superintendent, Central Excise, Karachi was, therefore, examined in Court today. He described this process as follows : Iron in the petitioner-Mill is heated to such a degree that it becomes extremely softened and is malle able, and it can easily be turned into any shape or forms. It is neither a hard substance nor is it in liquid form. The new produce is then turned into "steel ingots". He, however, admitted that iron-scrap in the petitioners-Mill never reaches the melting point.

"Smelting", according to Black's Law Dictionary, means melting of ores in the presence of some re-agent which operates to separate the metallic element by combining with a non metallic element. Chamber's Technical Dictionary, 1968 Edition, describes this process as "Fusion of an ore or concentrate with suitable fluxes, to produce a melt consisting of two layers-on top a "slag of the flux and quaque minerals and below molten impure metal." Smelting, therefore, means melting; this was even admitted by Mujib Ahmed Ansar, the Superintendent of Central Excise. Now, melting can take place only if a solid material is heated to such an extent and degree that it becomes a liquid.

To "melt" means to become liquified by heat. It is admitted that iron-scrap at the petitioners' mill never reaches the state of its being a liquid. This turning point is never reached. A Clearly, therefore, the petitioners cannot be said to have adopted the process of smelting described in the Act for the manufacture of the produce "steel ingots" so as to become liable to excise duty introduced by the Finance Act.

On this view of the matter, the levy of excise duty from the petitioners is without lawful authority, and we quash the impugned orders challenged in these cases.

All these petitions thus succeed, but as the dispute involved resolution of legal controversy, we leave the parties to bear their own costs.

A. E. Petition allowed.

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