2013 (11) TMI 991 - AT - Central Excise

100% EOU - Egg Shell Powder Manufactured Item or not Benefit of exemption of Notification No.23/2003 Held that - The processes are minimal and are essentially of a nature required to dispose of the same rather than to do any value addition or change in character of naturally occurring egg shell thus, the view that Egg Shell Powder cannot be considered as a manufactured product - Following Collector of Central Excise, Patna Vs Tata Iron and Steel Co. Ltd. 2004 (2) TMI 68 - SUPREME COURT OF INDIA - The appellant has a strong case in view of the exemption at S. No. 21 of Notification No.23/2003, which exempts waste from food industries manufactured in 100% EOUs - 100% EOU is normally expected to export all its products - for some of the products of residual nature, like egg shell, there may not be an export market and EOUs will be forced to clear such waste into domestic tariff area. The exemption enables 100% EOU producing food products to dispose of waste products, if arising out of indigenous raw materials, without payment of any excise duty to Domestic Tariff Area - If the waste product is not excisable there is no need for the exemption - The notification goes one step further to make the liability clearer by providing that even if any waste product may be considered as manufactured product, duty need not be paid on such product - Egg Shell powder is almost similar to oil cake left behind when vegetable oil is extracted from oil seeds - Oil cakes also are used in making animal feed - For oil cake exemption is provided at S. No. 20 of the notification - Similar exemption can be seen for tea waste and coffee waste at S. No. 19 of the same notification there is no reason to deny the benefit of this notification to Egg Shell Powder Decided in favour of Assessee.

Summary

Issues:
Whether Egg Shell Powder is a manufactured item subject to excise duty and if the appellant is eligible for exemption under Notification No.23/2003-CE.

Analysis:
1. The issue in this appeal revolves around determining whether Egg Shell Powder, a by-product of egg processing, qualifies as a manufactured item liable for excise duty. The appellant, a 100% EOU, contends that the product is merely a waste generated during the manufacturing process of egg products meant for export, citing legal precedents to support their argument.

2. The manufacturing process of Egg Shell Powder involves collecting egg shells, heating them to remove smell and inner membrane, powdering, and packing them for sale as a calcium supplement in animal and poultry feed. The Revenue argues that these processes amount to manufacturing a new product, distinct from the raw material, and thus subject to excise duty.

3. The appellant relies on the decision in Wolkem India Ltd Vs. CCE, emphasizing that the content of Egg Shell Powder remains the same as naturally occurring egg shells, implying no substantial manufacturing process is involved. Additionally, the appellant claims eligibility for exemption under S.No.21 of Notification No.23/2003-CE applicable to waste from food industries manufactured in 100% EOUs.

4. The Revenue contends that the processes undertaken to make Egg Shell Powder transform it into a marketable calcium supplement, distinct from mere waste disposal. Drawing parallels with a similar case involving cassia meal, the Revenue argues that Egg Shell Powder should be considered a manufactured item subject to excise duty.

5. The Tribunal's analysis delves into the nature of the processes involved, the value addition, and the change in the product to determine its classification. Drawing distinctions from previous cases involving waste products, the Tribunal concludes that Egg Shell Powder does not qualify as a manufactured product due to minimal processes and lack of significant value addition.

6. Moreover, the Tribunal highlights the relevance of the exemption under Notification No.23/2003-CE, emphasizing that even if Egg Shell Powder were considered a manufactured product, the appellant would still be eligible for exemption under S.No.21, akin to exemptions provided for other waste products like oil cakes, tea waste, and coffee waste.

7. Consequently, the Tribunal sets aside the Revenue's demand for excise duty on Egg Shell Powder, ruling in favor of the appellant and allowing the appeal based on the lack of substantial manufacturing processes and the applicability of the exemption under Notification No.23/2003-CE.

8. The judgment provides a comprehensive analysis of the legal arguments, precedents, and statutory provisions involved in determining the classification and tax liability of Egg Shell Powder, ultimately clarifying the appellant's eligibility for exemption and resolving the dispute in their favor.