TaxTMI 
TaxTMI 
2014 (12) TMI 657
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....ss, some quantity of aluminium ingots get oxidised resulting in emergence of dross and skimming. Since inception, the Petitioners has been clearing aluminium dross and skimming for a price, without payment of excise duty. 5. The matter has a checkered history. According to the Department, the Petitioner is engaged in the manufacturing of aluminum sheets, foils falling under Chapter subheading 76071190 of the Central Excise Tariff Act, 1985. The major raw material for aluminum sheets/foils is aluminium ingots. In the course of manufacturing of aluminum sheets/foils, aluminium dross and skimming emerge as byproducts, which are chargeable to Central Excise duties under subheading 26204010 of the Central Excise Tariff Act, 1985. The Petitioner sells these on regular basis. The Department terms them as byproducts. The Department claims that section 3 of the Central Excise Act, 1944 levies Central Excise duty on all excisable goods, which are produced or manufactured in India and at the rate set-fourth in the First and Second Schedules of the Central Excise Tariff Act, 1985. They rely upon the definition of the term "excisable goods" appearing in section 2(d) of the said Act. They als....
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....ey ordinarily come to the market to be bought and sold and are known to the market. Mr.Sridharan submits that in the case of Union of India vs. Indian Aluminium Co. Ltd. reported in 1995 (77) ELT 268 (SC) the above view taken by a learned Single Judge of this Court was specifically referred to and confirmed. Again, the issue of excisability of aluminium dross and skimming was adjudicated before the Tribunal. In the Petitioner's own case, which is also a reported one, the technical member of the Tribunal, who was in minority, held that aluminium dross and skimming are 'goods' because they being bought and sold in the market. However, the majority followed the decision of this Court and held that the aluminium dross and skimming are not a result of manufacture and hence not goods, being not a new commodity. Therefore, that is not liable to Excise duty. 8. An appeal was filed by the Revenue to the Hon'ble Supreme Court and in the decision reported in 1999 (111) ELT A200 (SC), the Revenue's Appeal came to be dismissed. Further, during the course of dealing with the issue of excisability of cinder, i.e. ash obtained by burning of coal, to excise duty, once again t....
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....mount to bypassing them. That shows disrespect and disregard to the settled legal position emerging from these Judgments. Mr. Sridharan therefore submits that the ground or reasons on which these Judgments have been distinguished show that the Tribunal completely misdirected itself and the larger Bench did not abide by the legal principles, but ignored them completely. The Tribunal's order can safely therefore be termed as perverse. He therefore submits that the Writ Petition be allowed. 9. On the other hand, Mr. Sethna appearing on behalf of the Revenue submitted that the Tribunal's view can be justified because now the legal position has undergone a complete change. Mr. Sethna heavily relies upon the affidavit in reply filed in this Writ Petition to urge that the explanation has been inserted with a specific purpose. Mr.Sethna submits that the observations of the Hon'ble Supreme Court in the case of Union of India vs. Indian Aluminium reported in 1995 (77) ELT 268 (SC) are nullified with the change in law. With the amendment in section 2(d) of the Central Excise Act, 1944, the produce aluminium dross and skimming are deemed to be marketable. They are capable of bei....
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....Third Schedule, involves packing or repacking of such goods in a unit container or labelling or rerebelling of containers including the declaration or alteration of retail sale price on it or adoption of any other treatment on the goods to render the product marketable to the consumer; and the word "manufacture" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account" 12. The facts being undisputed, the only issue that arose before the Tribunal was "whether the definition having been either amended or an Explanation inserted thereto would result in any change in the legal position". 13. We do not wish to once again burden this Judgment with the manufacturing activities undertaken by parties like the Petitioner, who was Appellant before the Tribunal. The Tribunal has extensively referred to them. The only argument was whether dross and skimming are not manufactured goods. In the first decision, which was rendered by a Single Judge of this Court, in the case of Indian Aluminium vs. A. K. Bandyopadhyay (sup....
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....ving a distinctive name, character or use. The duty is levied on goods. As the Act does not define goods, the legislature must be taken to have used that word in its ordinary, dictionary meaning. The dictionary meaning is that to become goods it must be something which can ordinarily come to the market to be bought and sold and is known to the market. That it would be such an article which would attract the Act was brought out in Union of India v. Delhi Cloth and General Mills Ltd. 1963 Supp (1) SCR 586 = (AIR 1963 SC 791" 24. The question that one must ask oneself is whether therefore dross and skimmings are "goods". It may be that dross and skimmings may be capable of fetching some sale price. for that matter any rubbish can be sold. But that is not the criterion. It cannot be said that dross and skimmings are the result of treatment, labour or manipulation whereby the end product is dross and skimmings. They are merely the scum thrown out in the process of manufacture of aluminium sheets. Therefore it cannot be said that dross and skimmings are transformation resulting in a new and different article with a distinctive name, character or use or that they ordinarily come ....
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....eported in 1995 (77) ELT 268, with the correctness of the view taken by the Assistant Collector of Excise Department. His view was reversed by the Appellate Collector. A revision was preferred by the Excise Authorities and which came to be allowed by the Government of India. The revisional decision was challenged by the Assessees by filing a Writ Petition, which was allowed by a learned Single Judge of the High Court. A Division Bench upheld this decision in Appeal by summarily dismissing it. That is how the matter was carried to Supreme Court. In that regard, the Supreme Court made the following observations: "12. The show cause notice of 721974 was, however, issued by the department relying upon the proviso to subrule (2) of Rule 56A which is to the following effect: "56A(2): Provided that no credit of duty shall be allowed in respect of any material or component parts used in the manufacture of finished excisable goods- (1) If such finished excisable goods produced by the manufacturer are exempted from the whole of the duty of excise leviable thereon or are chargeable to nil rate of duty...." In other words, the contention of the depa....
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....ourt, therefore, rightly came to the conclusion that the proviso to Rule 56A was not applicable as aluminium dross and skimmings are not excisable goods." 15. Thereafter, in para 18 of this Judgment, the argument noted was that the manufacturers in Civil Appeal Nos. 1423, 2759 and 3982 of 1987 were also engaged in manufacturing aluminium goods out of aluminium ingots. Their cases, however, were little different from the case of Indian Aluminium Co. Ltd. and there the Supreme Court dealt with the same legal issue but after the changes were made in the Excise Tariff. Pertinently, however, the Supreme Court reiterated the legal position in para No. 22. The Hon'ble Supreme Court agreed with the reasons and conclusions of the learned Single Judge of this court, from whose Judgment an Appeal was dismissed by the Division Bench. It confirmed the view taken in 1980 (6) ELT 146 (Bom.). 16. Once again this issue came before the Hon'ble Supreme Court in the context of zinc dross and flux skimming. That arose from a Judgment and order of the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, dated 25th June, 2004. After discussing the rival contentions and referring t....
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....ss scrap because such scrap is not manufactured in India. This contention of the assessee was rejected on the ground that brass scrap was being produced in India. The argument on behalf of Revenue was that waste and scrap is mentioned in Entry 26A of the first Schedule to the Tariff Act and is therefore exigible to excise duty. Since reliance was placed on the argument that waste and scrap being found in relevant entry in the First Schedule to the Tariff Act and therefore were exigible to customs duty, this authority was pressed into service in support of the argument that presence of an item in an Entry to the First Schedule to the Act makes it per se subject to levy of excise duty. In our view, this authority is of no help to the appellants. This was basically a case of levy of additional customs duty, for which different considerations apply. ..... 13 We are unable to accept the proposition advanced by the learned Additional Solicitor General. A close look at Section 3 of the Central Excise Act shows that the words 'excisable goods' have been qualified by the words "which are produced or manufactured in India". Therefore, simply because goods find menti....
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.... the test of being manufactured in India. Even if it is saleable, it does not make any difference. The result is that the contention of the revenue that cinder is liable to payment of excise duty is hereby rejected." 18. It concluded that merely because the goods satisfying the test of being marketed and saleable, it does not mean that the test of being manufactured in India has been satisfied. The Hon'ble Supreme Court notes and specifically the argument which was canvassed namely, addition of dross, cinder, skimmings etc. in the list of the items to the Schedule to the Central Excise Tariff, however, it held that that is not safe to make it excisable as it has to pass further test of manufactured or produced in India. 19. Mr. Sridharan then placed reliance upon the Judgment of the Hon'ble Supreme Court in the case of Commissioner of Central Excise vs. Tata Iron and Steel Co. Ltd. (supra). There, again the Hon'ble Supreme Court was required to examine the issue as to whether zinc dross, flux skimming and zinc scallings arising as byproduct during galvanization of steel sheets are excisable goods. In that regard, paras 9, 10, 14 and 16 of this decision are relevan....
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....ture of aluminium sheets and, therefore, cannot be said the result of treatment, labour or manipulation whereby a new and different article emerges with a distinctive name, character or use which can ordinarily come to the market to be brought and sold. Merely because such refuse or scum may fetch some price in the market does not justify it being called a byproduct, much less an end-product or a finished product." 20. The Hon'ble Supreme Court finally in para 22 agrees with its earlier view in the case of Indian Aluminium Co. Ltd (supra). and holds that merely selling does not mean dross and skimming are marketable commodity as even rubbish can be sold. Everything which is sold is not necessarily a marketable commodity as known to commerce and which it may be worthwhile to trade in. The issue involved is governed by the past decisions of the Tribunal and also of the Supreme Court. Thus, it agrees with its earlier Judgments. Thereafter, the Hon'ble Supreme Court was required to consider this issue and as already referred by us in the case of Commissioner of Central Excise vs. Indian Aluminium Co. Ltd. reported in 2006 (203) ELT 3(SC). Finally, in the case of Grasim Indus....
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....s not necessary that only in the section or chapter note it must be specified that a particular process amounts to manufacture. It may be open to so specify even in the tariff item. However, either in the section or chapter note or in the tariff entry it must be specified that the process amounts to manufacture. Merely setting out a process in the tariff entry would not be sufficient. If the process is indicated in the tariff entry, without specifying that the same amounts to manufacture, then the indication of the process is merely for the purposes of identifying the product and the rate which is applicable to that product. In other words, for a deeming provision to come into play it must be specifically stated that a particular process amounts to manufacture. In the absence of it being so specified the commodity would not become excisable merely because a separate tariff item exists in respect of that commodity." 8. The goods have to satisfy the test of being produced or manufactured in India. It is settled law that excise duty is a duty levied on manufacture of goods. Unless goods are manufactured in India, they cannot be subjected to payment of excise duty. Simply beca....
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....r use." ..... 14. In the present case, it is clear that the process of repair and maintenance of the machinery of the cement manufacturing plant, in which M. S. scrap and Iron scrap arise, has no contribution or effect on the process of manufacturing of the cement, which is the excisable end product, as since welding electrodes, mild steel, cutting tools, M. S. Angles, M. S. Channels, M. S. Beams etc. which are used in the process of repair and maintenance are not raw material used in the process of manufacturing of the cement, which is the end product. The issue of getting a new identity as M. S. Scrap and Iron Scrap as an end product due to manufacturing process does not arise for our consideration. The repairing activity in any possible manner cannot be called as a part of manufacturing activity in relation to production of end product. Therefore, the M. S. scrap and Iron scrap cannot be said to be a byproduct of the final product. At the best, it is the byproduct of the repairing process which uses welding electrodes, mild steel, cutting tools, M. S. Angles, M. S. Channels, M.S. Beams etc." 21. We do not see how, in the light of these authoritative pronounc....
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....sfied before the goods can be said to be excisable to tax or Central Excise duty. It is in these circumstances that the attempt of the Tribunal and which is supported before us by Mr. Sethna cannot be upheld. Each of these observations and from para 6.5 onwards run counter to the Judgments of the Hon'ble Supreme Court. 23. In para 6.9, the tribunal takes assistance of a Supreme Court Judgment and concludes that the ratio of any decision can be applied only if the facts are identical. True it is that the Hon'ble Supreme Court holds this way, however, what are those facts and emerging from the record of this case which would enable it to take a different view have not been spelt out by the Tribunal. Even these observations and conclusions would go to show that the Tribunal does not dispute that it is considering the same controversy and in relation to the same aluminium dross, which could be termed as either a byproduct or waste or scrap or rubbish. Once there are twin tests, then, all these observations are of no assistance to the Revenue. The reliance placed by Mr.Sethna on a Judgment in the case of this very Assessee rendered by the Allahabad High Court 2009 (243) ELT 4....