CA Nischal Agarwal
Facts of the Case
The petitioner was engaged in the generation of electricity by burning coal resulting in production of Fly Ash as by-product which has commercial value in the market and thus it can be said that Fly Ash is marketable. The petitioner sold part of such fly ash generated to cement companies without paying any duty thereon levied vide Notification No 01/2011 dated 01-03-2011.
It was stated by Ld. DR that electricity is not an exempted product and it finds a place in the first schedule to the Act and thereby it is classified as tariff item. Being non-excisable goods, electricity cannot be regarded as exempted goods and as the ‘Fly Ash’ arising during the production of electricity is not covered by the Notification No.89/95-CE dated 18.05.1995, duty is to be paid on the ‘Fly Ash’. It was further prayed by the department that the impugned product is admittedly a by-product but as the statute has fastened a statutory liability with it, the same has to be discharged. It was also argued that since Fly Ash finds place in Central Excise Tariff, excise duty liability is attached to it.
The Ld. AR referred Section 2(f) of Central Excise Act, 1944 and stated that manufacture will take place when the raw material is subject to the process of transformation into a new and distinct product by skillful manipulation. Further, it was pointed out that the twin test of manufacture and marketability has to be simultaneously satisfied for satisfying the levy of Central Excise duty, which is missing in the given case.
Further, reliance was placed on the decision of Hon’ble Apex Court in case of UOI vs Ahmedabad Electricity Company Limited wherein it was held that cinder is not exigible to excise duty as the same is unburnt part of coal and it did not satisfy the test of being manufactured in India as envisaged in the provisions of the Act. It was argued that said judicial pronouncement is pari material to the instant case and thus the impugned SCN was liable to be quashed.
The Hon’ble Court held that
“However, as already this Court held that the commodity ‘fly ash’ cannot be subjected to levy of excise duty because it is not an item of goods which has been subjected to process of manufacture, it may not be necessary for this Court to delve upon any other related issues. Accordingly, the issue is answered, holding that the good “fly ash” does not involve any manufacturing activity and it does not fall under the purview of excisable good so as to attract levy of excise duty.”
Accordingly the writ petition was allowed on this ground.