prpri Excise not leviable on scrap not emerging due to a process of manufacture Excise not leviable on scrap not emerging due to a process of manufacture

Case Law Details

Case Name : M/s Varun Beverages Limited Vs. CCE&ST (CESTAT Delhi)
Appeal Number : Ex. Appeal Nos. 51560 to 51563 of 2017
Date of Judgement/Order : 14/03/2018
Related Assessment Year :

M/s Varun Beverages Limited Vs. CCE&ST (CESTAT Delhi)

During the course of manufacture of excisable final product certain scrap materials emerges. These are scrap PVC shell, scrap sugar juice, scrap aluminum, scrap broken glass clear, scrap broken glass green, pet bottles, petroleum coke ash and various assorted waste products. The Revenue proceeded against the appellant for demand and recovery of Central Excise duty on such assorted scrap cleared by the appellant, on certain consideration.

Held by CESTAT

In the present case, we note that the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy.

FULL TEXT OF THE CESTAT ORDER IS AS FOLLOWS:-

All the four appeals are with common dispute with reference to Central Excise duty liability of the appellant on waste and scrap products cleared by them.

2. The appellant are engaged in the manufacture of sweetend/ non sweetend aerated water liable Central Excise duty. They were availing cenvat credit on various items in terms of Cenvat Credit Rules, 2004. During the course of manufacture of excisable final product certain scrap materials emerges. These are scrap PVC shell, scrap sugar juice, scrap aluminum, scrap broken glass clear, scrap broken glass green, pet bottles, petroleum coke ash and various assorted waste products. The Revenue proceeded against the appellant for demand and recovery of Central Excise duty on such assorted scrap cleared by the appellant, on certain consideration. The view of the Revenue is that after the introduction of Explanation under Section 2(d) for “excisable goods” if such scrap is being capable of bought and sold for a consideration the same shall be treated as marketable. On this premise, proceedings were initiated resulting in the impugned orders.

3. We have heard both sides and perused appeal record.

4. We note that the proceedings did not even identify the goods with any tariff heading to charge Excise duty. Even otherwise, we note that the appellant were engaged in the manufacture of sweetend / non- sweetend assorted water. During such manufacture these various assorted scrap arise which in any case cannot be considered as products arising out of a manufacturing process. The view of various judicial pronouncement on this issue has been consistent and clear. Such scrap materials arising as incidental products and even if they were sold for a consideration cannot be considered as excisable products. In this connection, we refer to the decision of the Tribunal in Magnum Ventures vs. CCE, Ghaziabad -2014 (303) ELT 226 (Tri. Del.). The Tribunal examining the provisions of Section 2(d) including the Explanation thereto observed as under:

“9. The lower authorities have strongly relied upon the amendment made in Section 2(d) of the Central Excise Act on 10-5- 2008 vide which the explanation was introduced vide Section 78 of the Finance Act, 2008. The said explanation was to the effect that any material which is capable of being bought and sold for consideration shall be deemed to be marketable. However, first of all, it has to be seen whether the said goods can be held to be result of any manufacturing activity. The expression “manufacture” stands defined under Section 2(f) of Central Excise Act, 1944 and is to the effect that the same would include any process incidentally or ancillary to the completion of a manufactured product or which is specified in relation to any goods in Section or Chapter notes of the First Schedule to the Central Excise Tariff Act, 1985 as amounting to manufacture or which involves packing or re-packing or labeling or re- labeling of container or declaration or alteration of retail sale price or adoption of any other treatment on the goods to render the product marketable to the consumer. Admittedly, the sludge as also pulper waste emerges during the course of manufacture of paper and paperboard and such emergence is inevitable. The same cannot be held to be any incidental or ancillary process to the completion of a manufactured product. Similarly, there is no deeming provision under any section or Chapter notes so as to hold the said emergence of waste in the shape of sludge or pulper waste, as amounting to manufacture. Admittedly, the third situation involving packing or re-packing, labeling or re- labeling or declaring MRP, etc. on the said sludge and paper waste is not involved in the present cases. As such, the emergence of sludge and pulper waste during the course of manufacture of paper or paperboard cannot be held to the result of any manufacturing activity.

10. The lower authorities have relied upon the addition of explanation to Section 2(d) of the Central Excise Act, 1944. However, if a product is not a result of a manufacture, such explanation relatable to the excisability of the goods, based upon the marketability of the same, cannot be used for holding a product to be the result of manufacture inasmuch as the same not only relates to the marketability of the product but also the “criteria of manufacture” is still required to be satisfied”.

5. We also note that the Hon’ble Supreme Court in the case of Union of India vs. Ahmedabad Electricity Co. Ltd. -2003 (158) ELT 3 (SC) examined the scope of excisability on the basis of marketability. The Apex Court held that only on the fact that the goods were marketed, excise duty cannot be automatically imposed. The Apex Court held that for being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skillful manipulation. Excise duty is an incident on manufacturer. The onus to show a particular goods emerged due to manufacture is on the Revenue. The Apex Court held that coal ash (cinder) was not liable to Excise duty.

6. In the present case, we note that the various goods on which the Revenue seeks to collect Excise duty are all, admittedly, products incidentally arising during the manufacture of finished goods on which in any case, the appellant is discharging duty. These scrap material are not emerging due to a process of manufacture. Hence, they do not qualify to be taxed for excise levy.

7. In view of the above discussions and analysis, the impugned orders are set aside. The appeals are allowed.

(Dictated and pronounced in the open Court).

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