Case Law Details

Case Name : Shri Nataraj Ceramics & Chemical Industries Ltd. Vs Commissioner of Central Excise (CESTAT Chennai)
Appeal Number : Appeal No.E/40087/2013
Date of Judgement/Order : 08/10/2018
Related Assessment Year :
Courts : All CESTAT (775) CESTAT Chennai (104)

Shri Nataraj Ceramics & Chemical Industries Ltd. Vs Commissioner of Central Excise (CESTAT Chennai)

The effect of the judgment of the Hon’ble Supreme Court in the case of Ahmedabad Electricity Co. Ltd. (supra) once for all settled the issue that cinder is not an excisable product. We find that the Board had accepted the said judgement in their circular dt. 18.11.2005 which had inter alia clarified as under :

“3. In view of the Apex Court decision against the Department’s circular, the instructions contained in the Circular No.386/19/98-CX., dated 7th April, 1988 would no longer be valid in their entirety. The said circular may, therefore be treated as withdrawn. Pending disputes, if any, may be decided accordingly.”

Once the earlier circular dt. 07.04.1998 has been withdrawn in its entirety, it stands to reason that the Board has withdrawn from its earlier decision that cinder is an excisable commodity.

The import of the said Supreme Court judgment and the Board’s circular dt. 18.11.2005 will then only mean that cinder is to be considered only as a non-excisable commodity.

The effect of Board’s circular dt. 18.11.2005 is to accept that Supreme Court’s ruling that cinder is non-excisable commodity. That particular circular has not been withdrawn. Hence cinder will continue to be a non-excisable commodity during the period of dispute, notwithstanding subsequent amendment to Section 2(d) ibid w.e.f. 10.05.2008.

FULL TEXT OF THE CESTAT JUDGMENT

Appellants were doing job work exclusively for Dalmia Refractories, Dalmiapuram, manufacturing refractory bricks castables etc. and clearing them directly to customers on payment of duty as per instructions of the latter. The appellants were also clearing waste materials namely cinders to Dalmia Refractories without payment of duty who in turn sold the same to various buyers on cost. Department took the view that clearances of cinders are to be subjected to duty at tariff rate. Hence a show cause notice dt. 09.09.2011 was issued to appellants inter alia proposing demand of Central Excise duty of Rs.1,15,169/- with interest thereon as also imposition of penalty under section 11AC of the Central Excise Act,1944. The original authority vide order dt. 07.02.2012 confirmed the proposals in the SCN. In appeal, the Commissioner (Appeals) vide impugned order dt. 25.09.2012 upheld the order of original authority. Hence this appeal.

2. Today when the matter came up for hearing, on behalf of the appellant, Ld. Advocate Shri M. Karthikeyan made number of submissions which can be broadly summarized asunder :

i) The Hon’ble Supreme Court in the case of UOI Vs Ahmedabad Electricity Ltd. – 2003 (1580 ELT 3 (SC) has elaborately discussed dutiability of cinders and whether the by-product namely, cinders can be said to be manufactured goods. The Supreme Court dismissed the department’s appeal against the decision of Gujarat High Court which had set aside the Circular No.386/19/98-CX dt. 07.04.1998 which had clarified that cinder is an excisable commodity classifiable under Heading 2621.00.

ii) The Board has subsequently issued a circular No.822/19/2005-CX dt. 11.2005 withdrawing their earlier circular dt.07.04.1 998.

iii) The Board has accepted the Supreme Court’s affirmation that cinder is not an excisable product.

iv) For these reasons, the impugned cinder cannot be subjected to excise duty and the demand is therefore unjustified and may be set aside.

3.1 On the other hand, Ld. A.R Ms. T. Usha Devi supports the impugned order.

3.2 She draws our attention to Board’s subsequent clarification in Circular No.904/24/2009- CX dt. 28.10.2009 which confirms excisable nature of the products termed hitherto as waste, residue or refuse and the legislative intention to demand duty on such products. Hence cinders which are sold for consideration are required to be subjected to Central Excise duty.

3.3 The decision of the Hon’ble Supreme Court in Ahmedabad Electricity Co. Ltd. cited by Ld. Advocate was made in 2003. However, w.e.f. 10.05.2008, the Explanation to Section 2 (d) of Central Excise Act,1944 was brought into effect, as per which “goods” include any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.” In the instant case, the goods are capable of being sold for consideration and hence they are very much marketable goods and exigible to Central Excise duty.

4. Heard both sides and have gone through the facts of the case.

5.1 The effect of the judgment of the Hon’ble Supreme Court in the case of Ahmedabad Electricity Co. Ltd. (supra) once for all settled the issue that cinder is not an excisable product. We find that the Board had accepted the said judgement in their circular dt. 18.11.2005 which had inter alia clarified as under :

“3. In view of the Apex Court decision against the Department’s circular, the instructions contained in the Circular No.386/19/98-CX., dated 7th April, 1988 would no longer be valid in their entirety. The said circular may, therefore be treated as withdrawn. Pending disputes, if any, may be decided accordingly.”

5.2 Once the earlier circular dt. 07.04.1998 has been withdrawn in its entirety, it stands to reason that the Board has withdrawn from its earlier decision that cinder is an excisable commodity.

 5.3 The import of the said Supreme Court judgment and the Board’s circular dt.18.11.2005 will then only mean that cinder is to be considered only as a non-excisable commodity.

 5.4 Both the lower authorities have placed reliance on the amendment to Section 2(d) of the Central Excise Act, 1944 w.e.f. 10.05.2008 by way of addition of Explanation. We find that the amended section 2(d) as it stood w.e.f. 10.05.2008 is as under :

“Section 2(d) –“excisable goods”means goods specified in the First Schedule and the Second Schedule to the Central Excise Tariff Act,1985 as being subject to a duty of excise and includes salt:

Explanation –for the purposes of this clause, „goods‟include any article, material or substance which is capable of being bought and sold for a consideration and such goods shall be deemed to be marketable.

We thus find that the Explanation is only an amplification only for goods which are “excisable goods”. In other words, the said Section 2(d) and its Explanation will obviously not be applicable to goods which are not excisable. As discussed earlier, the effect of Board’s circular dt. 18.11.2005 is to accept that Supreme Court’s ruling that cinder is non-excisable commodity. That particular circular has not been withdrawn. Hence cinder will continue to be a non-excisable commodity during the period of dispute, notwithstanding subsequent amendment to Section 2(d) ibid w.e.f. 10.05.2008.

5.5 The lower authorities have also placed reliance on Board’s subsequent circular dt.  28.10.2009 which gave clarifications on excisability of products termed as waste or residue or refuse arising during the course of manufacture. In the said circular Board referred to the amendment to Section 2(d) and clarified that such residue or refuse which arise during the course of manufacture and are capable of being sold for consideration would be excisable and chargeable to payment of Excise Duty.

5.6 It is however pertinent to note that the Hon’ble Bombay High Court in the case of Hindalco Industries Ltd. Vs UOI relying upon the judgment of the Hon’ble Supreme Court in the case of Grasim Industries Ltd. Vs UOI – 2011 (273) E.L.T. 10 (S.C.), held that the order of the Tribunal holding that dross and skimming of Aluminium, Zinc and other non-ferrous metal arising as by-products during manufacture and sold by assessee, was manufactured goods after 10-5-2008 was contrary to the aforesaid judgment of the Apex Court. The relevant portions of the order are reproduced as under :

“21. We do not see how, in the light of these authoritative pronouncements of the Hon‟ble Supreme Court, can the Tribunal take a different view. When the Hon‟ble Supreme Court holds and as in Grasim Industries Ltd. (supra) that the conditions contemplated under Section 2(d) and Section 2(f) have to be satisfied conjunctively in order to entail imposition of excise duty under Section 3 of the Act, then, we annot agree with the Tribunal. The Larger Bench decision does not take into account the fact that the authoritative pronouncement by the Supreme Court and repeatedly rendered is binding on it. That is law declared under Articles 141 of the Constitution of India. That it is rendered in the case of identical issues, controversy and the Assessee makes these Judgments of the Supreme Court all the more binding. Their binding effect is not lost merely because the Tribunal has another occasion to consider the issue or another shade of the same controversy. So long as there are Supreme Court Judgments in the field, we do not see how the Revenue could have proceeded to disregard them.

22. That the Revenue does not wish to abide by them would not mean that the Tribunal is justified in not following them. We find that the attempt made by the Tribunal to hold that what is marketable and satisfies the requirement stipulated in the Explanation necessarily means that they are liable for imposition of duty under Section 3 is directly contrary to the binding Judgments of the Honble Supreme Court on the same issue. The attempt of the Tribunal in para 6.5 in proceeding to analyse that the process and concluding that nobody deliberately manufactures waste, dross and scrap is in direct conflict with the findings of the Honble Supreme Cour. Waste and scrap emerge as a by-product in the course of manufacture of other products. The whole purpose of making these observations is to justify the conclusion that because there is a reference to these items in the Tariff Entry or the Tariff Schedule that would change the colour of the controversy. That would enable the Tribunal to then hold that the earlier Judgments and in the case of this very Assessee are no longer good law. However, we do not see how the decision in the case of Grasim Industries Ltd. (supra) and particularly the above reproduced paragraphs could have been brushed aside by the TribunalThe Honble Supreme Court listed the twin tests and which have to be satisfied before the goods can be said to be excisable to tax or Central Excise duty. It is in these circumstances that the attempt of the Tribunal and which is supported before us by Mr. Sethna cannot be upheld. Each of these observations and from para 6.5 onwards run counter to the Judgments of the Hon ble Supreme Court.”

6. In the light of discussions herein above, we find that the impugned order upholding the view of original authority that cinder is a dutiable product and exigible to Central Excise duty cannot be sustained and will require to be set aside which we hereby do. Appeal is allowed with consequential relief, if any, as per law.

(operative of the order pronounced in court)

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