2024 (9) TMI 612 - AT - Central Excise

Fly ash from coal burning for electricity production not manufactured goods under Section 2(f) Central Excise Act 1944

CESTAT Ahmedabad held that fly ash generated from burning coal for electricity production does not constitute 'manufactured goods' under Section 2(f) of ... Exsicability - manufactured goods as per the Section 2(f) of Central Excise Act, 1944 or not - fly Ash arising in burning coal - HELD THAT:- This issue is no longer res integra as the Hon’ble Supreme Court settled this issue pre and post 01.03.2011, wherein it was consistently held that burning of coal for the purpose of generating power and emergence of fly Ash in this process does not amount to manufacture as the coal is not raw material for manufacturing fly Ash whereas the same is required for generation of electricity, the fly Ash is generated inevitably. In this position the Hon’ble Apex Court taken a view that this cannot be called as manufacture of Fly Ash and accordingly the same is not liable to duty. The relevant Judgment is in the case of UNION OF INDIA VERSUS AHMEDABAD ELECTRICITY CO. LTD. [2003 (10) TMI 47 - SUPREME COURT] wherein it was held 'it is clear that to be subjected to levy of excise duty 'excisable goods must be produced or manufactured in India For being produced and manufactured in India the raw material should have gone through the process of transformation into a new product by skilful manipulation. Excise duty is an incidence of manufacture and, therefore, it is essential that the product sought to be subjected to excise duty should have gone though the process of manufacture. Cinder cannot be said to have gone through any process of manufacture, therefore, it cannot be subjected to levy of excise duty.' The impugned order is not sustainable and the same is set aside. The appeal is allowed. Issues involved:Whether fly ash arising from burning coal is considered manufactured goods under the Central Excise Act, 1944 and is liable to excise duty.Analysis:The main issue in this case is whether fly ash generated from burning coal for power generation constitutes manufacturing and is subject to excise duty. The appellant argues that fly ash does not amount to 'manufacture' as defined under the Central Excise Act, as there must be a new product with distinct characteristics and marketability for excise duty to apply. Several court decisions, including Moti Laminates v. CCE and Indian Aluminium, support this interpretation. The appellant also cites the Supreme Court's ruling in Union of India v. Ahmedabad Electricity Company Limited, where it was held that the generation of cinder from burning coal does not constitute manufacturing. The Hon'ble Tribunal has also held that notifications cannot create a levy when there is none, as seen in cases like Kiran Spinning Mills v. CCE.The respondent, represented by the Deputy Commissioner, supports the findings of the impugned order.The Hon'ble Tribunal, after considering the arguments from both sides, relies on the Supreme Court's precedent in Union of India v. Ahmedabad Electricity Company Limited to conclude that the generation of fly ash from burning coal for power generation does not amount to manufacturing and is not subject to excise duty. The Tribunal emphasizes that coal is used as fuel for power generation, not as a raw material for manufacturing fly ash, and therefore, fly ash does not undergo a manufacturing process. The Tribunal also references the Madras High Court's decision in CBIC v. Mettur Thermal Power Station, where it was held that fly ash generated during coal burning is not a manufactured good and is not liable to duty. The Tribunal sets aside the impugned order and allows the appeal based on these legal principles.In conclusion, the Tribunal's decision is based on established legal precedents that burning coal for power generation and the resulting fly ash do not constitute manufacturing under the Central Excise Act, and therefore, fly ash is not liable to excise duty.