Court deems Circular & Trade Notice on cinder as excisable goods arbitrary. Circular set aside.

The Court held that the Circular and Trade Notice classifying cinder under Heading No. 26.21 were arbitrary and illegal. It ruled that cinder, as a residue of coal, did not qualify as excisable goods under the Central Excise Tariff Act. The Court set aside the Circular and Trade Notice, along with related show cause notices, with the petitions allowed and no costs awarded.

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Issues Involved:
1. Validity of the Circular issued by the Central Board of Excise and Customs on 7-4-1998.
2. Classification of "coal-ash (cinder)" under sub-heading No. 2621.00 of the Central Excise Tariff Act, 1985.
3. Applicability of excise duty on "coal-ash (cinder)".
4. Binding nature of Tribunal decisions on the Department.
5. Interpretation of the Schedule to the Central Excise Tariff Act.

Issue-Wise Detailed Analysis:

1. Validity of the Circular issued by the Central Board of Excise and Customs on 7-4-1998:
The petitioners challenged the Circular issued by the Central Board of Excise and Customs on 7-4-1998 and the consequential Trade Notice No. 36/98, dated 22-5-1998. The Circular clarified that "coal-ash (cinder)" is an excisable commodity classifiable under sub-heading No. 2621.00 of the Central Excise Tariff Act, 1985, and chargeable to an appropriate rate of duty. The petitioners argued that the Circular was contrary to the decisions of the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT), which had held that cinder was not excisable goods.

2. Classification of "coal-ash (cinder)" under sub-heading No. 2621.00 of the Central Excise Tariff Act, 1985:
The petitioners contended that cinder obtained during the course of generating electric power by using coal in boilers was not excisable goods. They argued that the residue and waste in the form of partly burnt coal, commonly known as "cinder," cannot be classified as an excisable commodity. The petitioners cited previous decisions by the Tribunal, which were upheld by the Supreme Court, stating that cinder obtained by burning coal in boilers did not constitute the manufacture of an excisable commodity even when it was sold for a price.

3. Applicability of excise duty on "coal-ash (cinder)":
The petitioners argued that even if cinder were to be treated as excisable goods, it should be classified under Heading No. 27.01 of the Schedule to the Tariff Act, where the rate of duty was "nil." Therefore, no duty was chargeable on cinder. They also contended that the Rules for the interpretation of the Schedule to the Central Excise Tariff Act should be applied, which lay down that the heading providing the most specific description should be preferred.

4. Binding nature of Tribunal decisions on the Department:
The petitioners asserted that the decisions of the Tribunal, which held that cinder was not excisable, were binding on the Department. They argued that a clarificatory Circular could not have been issued contrary to the decisions of the Tribunal, which had been upheld by the Supreme Court. The petitioners cited the case of Union of India v. Indian Aluminium Company Limited, where the Supreme Court held that waste or residue given out in the course of manufacture could not be considered as "goods" or a marketable commodity.

5. Interpretation of the Schedule to the Central Excise Tariff Act:
The learned Counsel for the petitioners contended that the Board could not have issued a clarification that nullified the decisions of the Tribunal. They argued that the interpretation of the Schedule to the Central Excise Tariff Act should be such that cinder cannot be classified as "ash." The petitioners cited various decisions to support their contention that cinder was not a manufactured commodity and was only a waste or residue, not chargeable to excise duty.

Judgment:
The Court held that the impugned Circular and Trade Notice classifying cinder under Heading No. 26.21 were arbitrary, illegal, and not warranted by the provisions of the Central Excise Act and the Central Excise Tariff Act. The Court noted that cinder, as a residue of coal, did not fall under the sub-heading 26.21 of the Schedule. The Court observed that mere refuse or ashes given out in the course of manufacture could not be considered as "goods" or a marketable commodity. The Court set aside the impugned Circular and Trade Notice, and the show cause notices issued pursuant to such Circular also fell to the ground. The petitions were allowed with no order as to costs.

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