TaxTMI 
TaxTMI 
2003 (10) TMI 47
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....lants. D.A. Dave and Joseph Vellapally, Senior Advocates (Ms. Meenakshi Arora, Uday Joshi, Harris Beeran, George Paulose, Devang S. Nanavati, H.A. Ahmedi, Saurin Mehta, Mrs. V.D. Khanna, Mrs. Nirmala Gupta, K.V. Viswanathan, Mrs. Gauri Rasgotra, Suman J. Khaitan, Ajay Aggarwala, Rajan Narain, Thomas Vellapally, M.H. Patil, Shri Narain, Sandeep Narain, Mrs. Anjali Jha, Jay Savla, Ms. Reena Bagga, Sanjeev Kapur, Umesh Kumar Khaitan, Ms. Indu Malhotra, Ms. Madhu Sweta, A.R. Madhav Rao, V. Balachandran, Ms. Suruchi Aggarwal, Ambhoj Kumar Sinha and Sanjay Kapur, Advocates, with them) for the respondents. JUDGMENT [per : Arun Kumar, J.]. The question which arises for consideration in this bunch of appeals is regarding exigibilty of 'cinder' to excise duty. The respondents in all the appeals use coal as fuel for producing steam to run the machines used in their factories to manufacture the end product. Coal is burnt in the boilers or furnaces for producing steam. Normally coal when it is burnt in boilers is reduced to ash. Some part of coal does not get fully burnt because of its low combustible quality. This unburnt or half burnt portion of coal is left o....
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....ned Counsel appearing for the assessees. They are : In the statutory appeals filed by the Revenue against the judgment of the Customs, Excise & Gold (Control) Appellate Tribunal in the case of Tata Iron and Steel Company (C.A. No. 4051/2003), it has been argued that the show cause notice issued by the departmental authorities was beyond time. Section 11A of the Central Excise Act which allows an extended period of limitation for issue of Show Cause Notice could not be invoked in the facts of the case because all necessary facts were being disclosed regularly by the Company to the Revenue authorities and there was no concealment or suppression or misrepresentation. Therefore, the show cause notice being highly belated was liable to be quashed. 5.Another point raised in the Tata Iron Company's case is that 'cinder' is a waste emerging from coal and the Company was spending much more on its removal from the site as compared to what it was getting from its sale. This point has been raised in some other cases also. This is a point which would arise on the facts of particular cases. Proper pleadings have to be there. The Tribunal being the fact finding body ought to hav....
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....alt; (e) ....... (f) "manufacture" includes any process incidental or ancillary to the completion of a manufactured product;......." 9. The learned Additional Solicitor General appearing for the Union argued that Section 3 of the Act is the charging Section. It provides that excise duty is to be levied on all excisable goods. Excisable goods are listed in the First Schedule to the Tariff Act. According to him, Section 3 read with Section 2(d) makes it clear that an item which is listed in the First Schedule to the Tariff Act is exigible to excise duty. It is further submitted that in view of the entry No. 26.21 in the First Schedule 'cinder' is liable to levy of excise duty. According to him, cinder is nothing but ash. From this argument, it follows that cinder is being equated to ash in order to bring it within Entry No. 26.21 to the First Schedule. As seen earlier, cinder is not ash - it is something between coal and coal ash. 10. For the sake of deciding this issue, we will assume that cinder is ash and, therefore, is liable to be covered under Entry 26.21. The real question to be considered is whether all items listed in the First Sched....
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....d Schedules of the Central Excise Tariff Act would make them excisable goods subject to duty." 12. These observations were made in the context of provisions of the Customs Act, 1962. The charging Section in that Act is Section 12 which refers to 'dutiable goods'. The expression 'dutiable goods' has been defined in Section 2(14) of the Act as goods which are chargeable to duty and on which duty has not been paid. In the present case however, we are considering the expression 'excisable goods' in the light of provisions contained in Section 3 of the Central Excise Act, 1944. Section 3 qualifies to expression 'excisable goods' by laying down the further requirement that such goods should be produced or manufactured in India. Such a requirement is not there in the Customs Act. Therefore, the above observations have no bearing on the issue involved in the present case. 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". Therefor....
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....nvolved, processes may be several or one. The natural meaning of the word 'process' is a mode of treatment of some material in order to produce a good result. Every process which is incidental or ancillary to the completion of manufactured product is included within the meaning of manufacture. The word 'process' has not been defined in the Act. In its ordinary meaning 'process' is a mode of treatment of certain material in order to give a desired shape to the material. It is an activity performed on a given material in order to transform it into something. 16.The word "manufacture" has been defined in various judgments of this Court. In South Bihar Sugar Mills v. Union of India [AIR 1968 SC 922], this Court observed : "The Act charges duty on manufacture of goods. The word "manufacture implies a change every change in the raw material is not manufacture. There must be such a transformation that a new and different article must emerge having a distinctive name, character or use." 17.In M/s. Hindustan, Polymers v. Collector of Central Excise [(1989) 4 SCC 323] this Court observed : "Excise Duty is a duty on the act of manufacture.....
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....v. Rajasthan State Chemical Works, Deedwana, Rajasthan and Others [(1991) 4 SCC 473], this Court adverted to the meaning of process as well as manufacture. The following passages occurring in the judgment are useful for present purpose : Manufacture implies a change but every" change is not manufacture, yet every change of an article is the result of treatment, labour and manipulation. Naturally, manufacture is the end result of one or more processes through which the original commodities are made to pass. The nature and extent of processing may vary from one class to another. There may be several stages of processing, a different kind of processing at each stage. With each process suffered the original commodity experiences a change. Whenever a commodity undergoes a change as a result of some operation performed on it or in regard to it, such operation would amount of processing of the commodity. But it is only when the change or a series of changes takes the commodity to the point where commercially it can no longer be regarded as the original commodity but instead is recognised as a new and distinct article that a manufacture can be said to take place. Manufact....
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....bsp; Sale or otherwise. The difference between use of goods in manufacture as raw material and use for other ancillary purposes was brought out. Goods used for ancillary puposes like fuel in the process of manufacture were held not to be exigible to tax. Since cashew shells were used only as fuel and they did not get transformed into the end product they were held to be not exigible to tax. Cashew shells were used in aid of manufacture of goods and as such they did not attract levy of tax. 23 In the case. in hand also coal which leads to production of cinder is not used as a raw material for the end product. It is being used only for ancillary purpose that is as a fuel. Therefore, irrespective of the fact whether any manufacture is involved in production of cinder it should be held to be out of the tax net for the reason that it is not a raw material for the end product. 24 In. producing 'cinder', there is no manufacturing process involved. Coal is simply burnt as fuel to produce steam. Coal is not tampered with, manipulated or transformed into the end product. For purposes of manufacture the raw material should ultimately get a new identity by virtue of the manufactr....
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.... Act. In the First Schedule to the tariff, cinder does not find any place anywhere. It appears that it is because of this that the Revenue had to fall back upon Entry 26.21 in the First Schedule in order to cover cinder within the excise net. The new Tariff that is Tariff Act, 1985 does not have a residuary entry like Entry 68 in the old Tariff. Instead the new Tariff has interpretative notes. Whenever some by-product of a product is sought to be included for taxability it has been so said in the interpretative notes. However, regarding coal their is no interpretative note nor there is anything about cinder. When cinder is derived from coal it could have at best been treated as coal for purposes of entries in the First Schedule to the Tariff Act. But that would not suit the department because coal is exempt from excise duty. The department now describes cinder as "coal ash". But coal ash also falls the test of being manufactured in India. It cannot be subjected to levy of excise duty. 27 The learned. Counsel appearing for the assessee brought to our notice several judgments of the CEGAT holding that cinder was not exigible to payment of excise duty. Against some of the judgments....
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....herefore, it could reasonably be said that 'cinder' i.e. coal of reduced quality still was coal and not exigible to excise duty. 29. In Modi Rubber Ltd., Modi Nagar, U.P. and Anr. v. Union of India and Others [1987 (29) E.L.T. 502 (Del.)] it was held that waste/scrap obtained not by any process of manufacture but in the course of manufacturing the end product was not exigible to excise duty. This was a case of manufacture of tyres, tubes etc. In the course of manufacturing process to produce the end product i.e. tyres, tubes, flaps etc. waste was obtained in the shape of cuttings. It was held that this was not exigible to tax even though the waste may have some saleable value. The essential reason for this was that there was no transformation in the case of waste/scrap to a new and different article. No new substance having a distinct name, character and use was brought about. Manufacturing process involved treatment, labour or manipulation by the manufacturer resulting in a new and different article. It requires a deliberate skillful manipulation of the inputs or the raw materials. This was not so in case of scrap. 30. It is worth mentioning that in UOI and Ors. v. I....
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....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. 33. The onus to show that particular goods on which excise duty is sought to be levied 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. 34. The Department has been consistently taking a stand that cinder is not excisable as it does not involve any manufacturing activity. The Department issued a clarification vide Circular No. B. 352/75-TRU (Pt.), dated 6th June, 1975. According to it coal ash left out in burning of coal would not attract duty under Item 68 for the reason that in the burning of coal as fuel, resulting in coal ash as a waste product no manufacturing process is involved....