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2015 (9) TMI 152
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....#39;Fly Ash' and 'Fly Ash Bricks' falling under Chapter sub heading 26219000 and 68159910 respectively, of the Central Excise Tariff Act, (CETA) 1985. The petitioner is aggrieved by the impugned show cause notice dated 21.03.2014, in and by which, the second respondent has stated that the petitioner has contravened the provisions of Rule 4,6,8 to 12 of Central Excise Rules, 2002 (in short, the Rules) since it had cleared 'Fly Ash' and 'Fly Ash Bricks' without payment of appropriate Excise duty, without taking Central Excise registration, without filing statutory monthly returns and without following the prescribed procedure. Therefore, CENVAT duty of Rs. 1,40,70,803 /- including Education cess and Secondary Higher Education cess has been demanded under erstwhile Section 11A(1) / Section 11A(5) of Central Excise of the Act 1944 (in short, the Act) for the clearance of 'Fly Ash' and further CENVAT duty of Rs. 1,85,443/-, including Education and Secondary Higher Education cess has been demanded for clearance of 'Fly Ash Bricks'. Apart from this, the respondent has also demanded interest and also proposed to impose penalty under the Rules. Ch....
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....ication dated 17.03.2012. The petitioner is not availing CENVAT credit facility, it is liable to pay CENVAT duty at 1% from 01.03.2011 to 16.03.2012 and 2% from 17.03.2012 onwards, on the value of 'Fly Ash' cleared. The product, 'Fly Ash Bricks', is excisable goods classified under chapter 68159910 of the Act and effective rate of excise duty was applicable on such goods cleared. It attracts duty at 8% from February 2009 to 2010, 10% from March 2010 to 16th March 2012 and 12% from 17th March 2012. Since 'Fly Ash' finds a place in the Central Excise Tariff, the petitioner is liable to pay Central Excise duty on the 'Fly Ash' clearances from 01.03.2011. 4. It is stated that electricity is not an exempted product and it finds a place in the first schedule to the Act and thereby it is classified as tariff item. Being non-excisable goods, electricity cannot be regarded as exempted goods and as the 'Fly Ash' arising during the production of electricity is not covered by the Notification No.89/95-CE dated 18.05.1995, duty is to be paid on the 'Fly Ash'. The petitioner has not paid duty on the 'Fly Ash' in lieu of the levy of duty ....
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....f fly ash. Thereafter, the rate of duty has been increased from to time by various notifications upto 6% with effect from 17.3.2012. Likewise, according to the respondent, 'fly ash brick' is also marketable and excisable commodity falls under Chapter 68159910 of the Act, attracts duty at 8% from February, 2009 to February 2010, at 10% from March, 2010 to 16th March 2012 and at 12% from 17th March, 2012. In view of this, it appears that the second respondent has issued a show cause notice, dated 21.3.2014, impugned in this writ petition, proposing to raise demand towards CENVAT duty along with interest and penalty, inasmuch as, the petitioner have cleared 'fly ash' and 'fly ash bricks' without payment of appropriate excise duty, without taking central excise registration and without filing statutory monthly returns. 8. This issue needs a reference to the relevant statutory provisions. Section 3 of the Act insists imposition of duties specified in first schedule, reads as under: "3. Duties specified in the First Schedule to be levied. (1) There shall be levied and collected in such manner as may be prescribed, duties of excise on all excis....
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.... First Schedule to the Act and thereby, they are subjected to levy of excise duty in view of Section 3 of the Act. It is to be noted that simply because goods find mention in one of the entries of the First Schedule, does not mean that they become liable for payment of excise duty. It is essential that the goods have to satisfy the test of being produced or manufactured in India. Excise duty is a duty leviable only on the manufactured goods. 11. It is appropriate to describe the meaning of "fly ash" and "fly ash bricks" as under: "Fly ash, also known as flue-ash, is one of the residues generated in combustion, and comprises the fine particles that rise with the flue gases. Ash which does not rise is termed bottom ash. In an industrial context, fly ash usually refers to ash produced during combustion of coal. Fly ash is generally captured by electrostatic precipitators or other particle filtration equipment before the flue gases reach the chimneys of coal-fired power plants, and together with bottom ash removed from the bottom of the furnace is in this case jointly known as coal ash. Depending upon the source and makeup of the coal being burned, the components of fly ash....
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....have gone through the process of manufacture in India is on the revenue. They have done nothing to discharge this onus. For this reason alone they must fail." Here, we are concerned with 'fly ash', which is produced during combustion of coal. The difference between 'cinder' and 'fly ash' is that when coal is not burnt fully and leaves pieces behind, is called 'cinder' whereas, when it is fully burnt and reduced to ash, is called 'fly ash'. Therefore, I am of the considered view that the ratio decided in the above said decision would squarely apply in the case of 'fly ash' also since the product 'fly ash' also cannot be said to have gone through any manufacturing process. In fact, to attract excise duty under Section 3 of the Central Excise Act, the article must satisfy the twin attributes of excisable goods, i) Mobility and ii) Marketability or it should find a place by that name in the Schedule to the Act, as held by the Apex Court in "Commissioner of Central Excise, Mumbai versus Josts Engineering Co. Ltd.," reported in 2002 (146) ELT 29 (SC). 14. However it is pertinent to note that in the above referred to decisio....
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.... marketability of the product, the learned counsel appearing for the petitioner would vehemently contend that the product fly ash would not attract levy of excise duty since it was produced during combustion of coal, as a waste product and no manufacturing process is involved. In this regard, the learned counsel relied upon an exemption Notification No.89/95 CE, dated 18.5.1995 issued by the Government of India, which grants exemption from the levy of duty on waste, parings and scrap arising in the course of manufacture of exempted goods and falling within the Schedule to the Central Excise Tariff Act, 1985 (5 of 1986). According to the learned counsel, since the fly ash is a waste or scrap arising in the course of manufacture of 'electricity' which is exempted good, by virtue of the above said Notification, no excise duty can be levied on the fly ash. 18. On the other hand, the learned counsel appearing for the respondent would contend that benefit of exemption granted by Notification No.89/95 CE, dated 18.5.1995 would be extended only on waste, parings and scrap arising during the manufacture of exempted products and electricity is not an exempted product, but it is a ....
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....r, a distinction has to be made between the term 'by-product' and the term 'waste.' Oxford Advanced Learner's Dictionary defines the term "by-product" as a substance produced during the process of making or destroying something else. Thus, if in course of manufacture of product A, a product B, also emerges in addition to the intended product A, even though there was no intention to manufacture the product B, the product B would be called a by-product. The waste is a by-product which is of no value or very low value. Larger Bench of the Tribunal in the case of Markfed Vanaspati & Allied Indus v. CCE, Chandigarh reported in 2000 (116) E.L.T. 204 (Tribunal) after observing that by-product means something of value produced in making the main product or a substance obtained in course of a specific process but not a primary object, has held that the spent earth arising in course of refining of oil, being of no value, is not a new product or a by-product. Though the Tribunal in the case of CCE, Hyderabad v. Priyanka Refineries Ltd. (supra) has held that soap stock arising in course of refining of oil is waste, no reasons have been given for arriving at this conclusion.....
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....that by-product cannot be treated as waste and thereby, the by-products, viz., soap stock/fatty acids, waxes and gums which were obtained in course of refining of crude vegetable oil cannot be treated as waste. The Tribunal was of the view that these by-products had satisfied the criteria for treating the process as manufacture and thereby they are manufactured products. It has been held so, by the Tribunal in para 4, which reads as under: "4. The waxes and gums obtained in course of refining is covered by heading 1522. As regards soap stock, the same would also be covered by Heading 1522, as, as per HSN Explanatory Notes of heading 1522, this heading among other things, covers soap stocks which are the by-product of oil refining, produced by neutralisation of free fatty acids with a base (sodium hydroxide) and consist of mixture of crude soap, natural oils or fats. As regards, fatty acids obtained in course of refining, the same by virtue of Chapter Note 1(e) to Chapter 15 are excluded from the purview of Chapter 15 and the same are specifically covered by Heading 3823. Therefore, each of the three by-products, soap stock/fatty acids, waxes and gums are the manufactured p....
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....at the following conditions must be satisfied for exemption under this notification:- (i) the goods must be waste, parings and scrap; (ii) the goods must be falling within the schedule to the Central Excise Tariff Act; (iii) the waste, parings and scrap must have arise in course of manufacture of excisable goods which are exempted goods i.e. goods chargeable to nil rate of duty or the same are fully exempt from duty under an exemption notification other than exempt notification granting full duty exemption based on value or quantity of the goods cleared in a financial year; and (iv) other than the exempted final product no other dutiable excisable goods are manufactured and cleared 23. It is the specific contention of the department that the 'fly ash' would emerge as a by product in the course of burning of pulverized coal for the manufacture of electricity and electricity is not an exempted product, but a non-excisable good, found place in the First Schedule to the Central Excise Tariff Act, 1985 and though the rate of duty is left blank in the relevant column, it denotes that electricity is classed as tariff item and hence, it cannot....