2012 (10) TMI 942 - AT - Central Excise

Tribunal rules rejected sesame seeds not subject to excise duty

The Tribunal ruled in favor of the appellant, holding that the rejected sesame seeds and chhilka were not excisable goods subject to Central Excise duty. ... Duty demand - Procurement and processing of sesame seeds indigenously first for removal of broken or undersized seeds and, thereafter, the good seeds are further processed for removal of their skin - rejected seeds and the skin of the seeds (chhilka) are cleared to DTA - Held that:- In this case there are two products which are being cleared by the appellant. First product is the rejected sesame seeds which are broken, or undersized seeds, which have been separated from the sesame seeds subjected by the appellant to the process of grading. In our view, the process of grading of seeds in which the broken, undersize or waste seeds get separated would not amount to manufacture and, as such, the reject seeds cannot be treated as excisable goods - As regards, the discarded skins of the seeds (chhilka), even though it may fetch some value, the same cannot be treated as excisable product, in view of the judgments of Apex Court in the case of Union of India v. Indian Aluminium Co. Ltd. reported in [1995 (4) TMI 62 - SUPREME COURT OF INDIA], Union of India v. Ahmedabad Electricity Co. Ltd. (2003 (10) TMI 47 - SUPREME COURT OF INDIA) and also a recent judgment of Hon’ble Allahabad High Court in the case of Balrampur Chini Mills Ltd. v. Union of India (2013 (1) TMI 525 - ALLAHABAD HIGH COURT). Therefore, the chhilka obtained in course of de-skinning of the sesame seeds is not an excisable product and its DTA clearances also would not attract any Central Excise duty - Decided in favour of assessee. Issues:Classification of rejected sesame seeds and chhilka as excisable goods for Central Excise duty.Analysis:The case involved a 100% EOU engaged in processing sesame seeds for export. The appellant procured sesame seeds domestically, processed them to remove broken or undersized seeds, and further processed the good seeds to remove their skin before exporting the hulled seeds. The rejected seeds and the skin of the seeds (chhilka) were cleared to DTA. The department contended that the rejected sesame seeds and chhilka were manufactured products chargeable to Central Excise duty. The Joint Commissioner confirmed a duty demand against the appellant for DTA clearances and imposed a penalty. The appellant appealed, arguing that the processing undertaken did not amount to manufacture, citing relevant legal provisions and precedents.The appellant's counsel argued that the process of processing sesame seeds did not amount to manufacture as per Section 2(f) of the Central Excise Act, and therefore, no excise duty should be levied on DTA clearances. Referring to a Tribunal case and judgments of the Apex Court and High Court, the counsel contended that the rejected sesame seeds and chhilka should not attract excise duty. The department defended its position, stating that the rejected seeds and chhilka were manufactured products attracting Central Excise duty.The Tribunal analyzed the case, citing a previous ruling that Central Excise duty on goods cleared by a 100% EOU into DTA is attracted only if the goods are excisable and the process amounts to manufacture. The Tribunal concluded that the process of grading seeds to separate broken or undersized seeds did not amount to manufacture, and therefore, the reject seeds were not excisable goods. Additionally, the discarded skins of the seeds (chhilka) were deemed not excisable products based on legal precedents. Consequently, the Tribunal held that the impugned order was not sustainable, set it aside, and allowed the appeal.In summary, the Tribunal ruled in favor of the appellant, determining that the rejected sesame seeds and chhilka were not excisable goods subject to Central Excise duty based on the processing activities undertaken by the 100% EOU. The judgment highlighted the distinction between manufacturing processes and non-excisable products, citing relevant legal provisions and judicial precedents to support the decision.