2014 (12) TMI 277 - AT - Central Excise

Tribunal clarifies gold sludge classification under Central Excise Tariff Act

Commissioner of Central Excise, Chennai-III Versus Titan Industries Ltd.

The Tribunal set aside the Commissioner (Appeals) order and upheld the adjudication order, clarifying the classification of the recovered gold Sludge ... Removal of gold Sludge without payment of duty - waste and scrap of containing precious metal or precious metal compounds - Penalty under Section 11AC - Demand of differential duty - Classification of goods - Held that:- It is seen from the Dispatch voucher No.30046586 dt. 21.5.2002 that the respondent cleared the goods under description 'Recovered Sludge from refining', to the quantity of 2525.10 kgs. cleared to M/s.Nirvighnam Plantinum Ltd., Juhu, Mumbai. It is also mentioned that the materials being sent on sale basis, type-non-returnable. The learned advocate on behalf of the respondent during the course of hearing submitted that the goods were sent to the job worker for recovery of gold and approximately 1% would be recovered. According to Revenue, it is waste and scrap of precious metal i.e. gold and it would be classified under Heading 7101 of CETA Commissioner (Appeals) proceeded on the basis of various case laws on the Sludge. All the case laws are related to Base metals which are classifiable under Chapter 72. Note 8 of Section XV of CETA'85 defines waste and scrap; Metal waste and scrap from manufacture of working of metals and metal goods definitely not usable as such of damage on clearance or for other reason. Chapter 71 is covered under Section XIV of CETA. Waste and scrap has not been defined in Chapter 71 of Section XIV of CETA. After going through HSN notes we are very clear that sub heading 7101.80 would cover waste and scrap of any metal containing precious metal used for recovery of precious metal. In the present case, it is a fact that the respondent cleared Sludge containing Gold, for recovery of precious metal. respondent contested the demand claiming Exemption Notification No.89/95-CE dt. 18.5.95 before the adjudicating authority. But, respondent, in their appeal before the Commissioner (Appeals) contested the demand mainly on non-excisability of the goods. Therefore, there is no need to discuss on the eligibility of exemption notification. - demand of duty confirmed - however penalty set aside - Decided partly in favour of Revenue. Issues:1. Appeal against order setting aside adjudication and allowing appeal with consequential relief.2. Classification of recovered gold Sludge under Central Excise Tariff Act.3. Interpretation of HSN notes for classification dispute.4. Application of penalty under Section 11AC.Issue 1:The Revenue filed an appeal against the Commissioner (Appeals) order setting aside the adjudication order and allowing the respondent's appeal with consequential relief. The adjudication order confirmed the demand of Central Excise Duty, interest, and penalty under Section 11AC. The Commissioner (Appeals) set aside the adjudication order, leading to the appeal by Revenue.Issue 2:The case involved the classification of recovered gold Sludge under Chapter 91 of the Central Excise Tariff Act, 1985. The Central Excise officers found that the respondent cleared 2525.100 kgs. of recovered gold Sludge without payment of duty. The Revenue argued that the goods were waste and scrap of precious metal, classifiable under Heading 7101.80 of the CETA'85, while the respondent claimed it was sludge arising during the manufacturing process and not waste and scrap.Issue 3:The Ld. Authorized Representative for Revenue argued that the impugned goods were waste and scrap of precious metal, citing HSN notes that cover materials used for recovery of precious metal. The respondent's representative countered, stating that the sludge was not waste and scrap but a product arising during the manufacturing process. The Tribunal analyzed the HSN notes and determined that the recovered sludge fell under Heading 7101.80 of the CETA'85, supporting Revenue's classification.Issue 4:Regarding the penalty under Section 11AC, the Revenue contended that the respondent cleared the goods without payment of duty with an intention to evade payment, justifying the penalty. The respondent argued that it was a classification dispute and penalty under Section 11AC should not be invoked. The Tribunal ruled that since it was a classification dispute, the penalty under Section 11AC was set aside, upholding the adjudication order subject to this modification.In conclusion, the Tribunal set aside the Commissioner (Appeals) order and upheld the adjudication order, clarifying the classification of the recovered gold Sludge under the Central Excise Tariff Act, and modifying the penalty imposition under Section 11AC due to the nature of the dispute.