TaxTMI 
TaxTMI 
2017 (1) TMI 222
X X X X Extracts X X X X
X X X X Extracts X X X X
....respondent was visited with a show cause notice by the 2nd appellant for contravention of Rules 4, 6 and 8 to 12 of the Central Excise Rules, 2002 (for short 'the Rules'). The show cause notice was issued on the ground that the respondent cleared 'Fly Ash' and 'Fly Ash Bricks' without payment of excise duty and without following the procedures prescribed under the Rules and, thereby, demand was raised for payment of excise duty and incidentally demand for interest was also raised in addition to the proposal to impose penalty under the Rules. Challenging the said show cause notice, the respondent herein preferred the writ petition. 3. In the writ petition, while the petitioner contended that 'fly ash' is not a product manufactured or produced by them and falling within the ambit of manufacture as envisaged under Section 2 (f) of the Central Excise Act, the said stand was countered by the appellants herein stating that 'fly ash', which is a by-product due to the burning of pulverised coal for power generation, is a marketable commodity having intrinsic value in the commercial market, which is used for the production of fly ash bricks, asbestos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uty on 'fly ash' and 'fly ash bricks' from time to time since March 2011. 6. It is the further contention of the learned counsel for the appellants that the respondent, without challenging the notifications, whereby imposition of excise duty has been made on 'fly ash' and 'fly ash bricks', has challenged the show cause notice issued on the ground that 'fly ash' is not an excisable commodity relying on the decision of the Apex Court in 2003 TIOL-17-SC-CX dated 29.10.03 (Ahmedabad Electricity Co. Ltd.) and, therefore, the writ petition itself is not maintainable. It is further stand of the respondent that since electricity is not an excisable commodity, the by-product, viz., 'fly ash' and 'fly ash bricks', also would stand exempt from excise duty, is legally untenable. It is the further contention of the learned counsel for the appellants that the Apex Court in Ahmedabad Electricity Co. Ltd. Case (supra) has not dealt with the exigibility of 'fly ash', as at that particular point of time 'fly ash' was an exempted good and, therefore, the contention of the respondent that the Apex Court has held that 'fly ash....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uced or manufactured in India . It is the submission of the learned counsel for the respondent that 'fly ash', being a by-product during the production/manufacture of electricity, cannot be said to be a commodity falling within the meaning of manufacture as defined under Section 2 (f) of the Act. 9. It is the further submission of the learned counsel for the respondent that the decision of the Apex Court in Ahmedabad Electricity Co. Ltd., (supra) which has been relied on by the learned single Judge, arose in a case of similar nature. In the said case, it was held that cinder or coal ash, which is a part of unburnt coal during the production of electricity, cannot be said to be a product, which falls within the definition of manufacture to attract duty. Learned counsel, therefore, contended that in the present case as well, during the production of electricity, 'fly ash' is collected as a by-product and there being no manufacturing activity for the production of 'fly ash', the commodity cannot be said to have been manufactured so as to be visited with duty. 10. It is the further submission of the learned counsel for the respondent that learned single Judge,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....abeling or re-rebelling 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 manufacturer 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." 15. From a reading of the above statutory provision, it is unambiguously clear that for a commodity to be levied with duty, the same must be produced or manufactured in India and that the raw material should have gone through the process of transformation into a new product. Further, it is also clear that the product, which is to be levied with duty, should have gone through a process of manufacture from the raw materials, which were used in the manufacture of the said product. Further the particular product should be capable of being bought and sold for a consideration and such goods shall be deemed to be marketable. 16. In the case on hand, there is no quarrel that the product 'fly ash' falls within the definition ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uty is leviable on the said product. However, it is the contention of the learned counsel for the respondent that 'fly ash' would attract Notification No.89/95-CE dated 18.5.95 and, thereby eligible for exemption as it is only a waste and scrap arising during the manufacture of an exempted product. 20. On the above rival contentions, learned single Judge had held that though 'fly ash' has marketability, however, Notification 89/95-CE dated 18.5.95 would stand attracted to 'fly ash' as it is a waste or scrap that has got formed during the process of manufacture of electricity. 21. Before answering the issue, it would be desirable to look at the law laid down on this point by the Supreme Court. 22. In the case of CCE Vs Laljee Godhoo & Co. (2015 (13) SCC 430), the Supreme Court held that twin tests are applicable for making the goods excisable, viz., (i) manufacture and (ii) marketability. In the said case, the Supreme Court further went on to hold that the first test of manufacture having not been satisfied, as no manufacture is involved, the product in the said case not was not exigible to excise duty. 23. In the case of Moti Laminates (P) Ltd. - Vs CCE ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....etable. The duty is on manufacture or production but the production or manufacture is carried on for taking such goods to the market for sale. The obvious rationale for levying excise duty linking it with production or manufacture is that the goods so produced must be a distinct commodity known as such in common parlance or to the commercial community for purposes of buying and selling. Since the solution that was produced could not be used as such without any further processing or application of heat or pressure, it could not be considered as goods on which any excise duty could be levied. * * * * * * * * 11. Although the duty of excise is on manufacture or production of the goods, but the entire concept of bringing out new commodity etc. is linked with marketability. An article does not become goods in common parlance unless by production or manufacture something new and different is brought out which can be bought and sold. In Union of India v. Delhi Cloth & General Mills Co. Ltd. [AIR 1963 SC 791] , a Constitution Bench of this Court while construing the word goods held as under: "These definitions make it clear that to become goods an article must be something whi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso that the aluminium cans prepared by the appellant are employed entirely by it in the manufacture of flashlights, and are not sold as aluminium cans in the market. The record discloses that the aluminium cans, at the point at which excise duty has been levied, exist in a crude and elementary form incapable of being employed at that stage as a component in a flashlight. The cans have sharp uneven edges and in order to use them as a component in making flashlight cases the cans have to undergo various processes such as trimming, threading and redrawing. After the cans are trimmed, threaded and redrawn they are reeded, beaded and anodised or painted. It is at that point only that they become a distinct and complete component, capable of being used as a flashlight case for housing battery cells and having a bulb fitted to the case. We find it difficult to believe that the elementary and unfinished form in which they exist immediately after extrusion suffices to attract a market." It was explained in Bhor Industries Ltd. v. CCE [(1989) 1 SCC 602 : 1989 SCC (Tax) 98 : (1989) 40 ELT 280] : (SCC p. 607, para 6) "It appears to us that under the Central Excise Act, as it stood at the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the materials in the production of other products. Therefore, there being no manufacture of 'fly ash', but 'fly ash' gets formed as a by-product during the production of electricity, merely because the goods 'fly ash' finds a place in the specific or residuary entry in the schedule it cannot be termed as an excisable commodity, since it satisfies the test of marketability. The twin tests have to be satisfied in order to bring a product within the ambit of excise duty and satisfaction of solitary test alone would not be sufficient to levy excise duty on the commodity. Therefore, mere marketability of the product alone would not be suffice to levy duty on the 'fly ash', there being no manufacturing process involved. 25. Insofar as the incidental question Whether the product 'fly ash', which is a by-product during the production/manufacture of electricity could be termed as a waste in order to attract Notification No.89/95-CE dated 18.5.95 , it is the contention of the learned counsel for the appellants that Notification 89/95-CE dated 18.5.95 would not stand attracted to the case of the respondent, as the product 'fly ash' is not a w....