2014 (4) TMI 371 - AT - Central Excise

Manufacture - Excisable goods - marketability - Saw dust - waiver of pre-deposit - Revenue contends that as per the amendment of the definition of excisable goods (Section 2(d) of the Central Excise Act) by the Finance Act, 2008 with effect from 10/05/2008, saw dust generated in the course of manufacture of plywood in the appellant s factory also became excisable goods and consequently, from that date, the appellant was clearing both dutiable and exempted goods and was liable to maintain separate accounts in terms of Rule 6(2), failing which they should pay 10%/5% of the value of the saw dust - Held that - Explanation was inserted w.e.f. 10/05/2008. Applying the amended provision to the facts of this case, I find that the saw dust is a marketable product . The question, however, remains as to whether it can be considered to be a manufactured product . It is not the case of the Revenue that the appellant had obtained registration from the Department for the manufacture of saw dust. Undisputedly, the appellant is a manufacturer of plywood. It is not in dispute that saw dust was generated as a waste during the course of manufacture of the excisable product viz. plywood. Saw dust was not consciously and intentionally manufactured. Prima facie, it is not a manufactured product. For any commodity to be called excisable goods, it should satisfy cumulatively both the conditions viz. manufacture and marketability. The amendment cited by the learned Superintendent (AR) only goes to establish marketability. It does not improve the Revenue s case in so for as the question whether saw dust is a manufactured product is concerned. - Stay granted.

Summary

Issues:
1. Whether sawdust can be considered an exempted product for the purpose of Rule 6(3)(b) of the CENVAT Credit Rules, 2004.
2. Whether the appellant was required to maintain separate accounts for dutiable and exempted products.
3. Whether sawdust qualifies as a manufactured product under the Central Excise Act.
4. Whether the demand raised on the appellant is sustainable.

Analysis:

1. The appellant, engaged in plywood manufacturing, sold sawdust without paying excise duty. The Department treated sawdust as an exempted final product due to the nil rate of duty during the disputed period. A demand was raised on the appellant under Rule 6(3)(b) of the CENVAT Credit Rules, 2004, amounting to Rs.35,100/-, confirmed by the original and appellate authorities, with a penalty imposed as well.

2. The appellant argued that sawdust, being a waste product, should not be considered exempted goods under Rule 6(3)(b). The Department contended that sawdust became excisable goods as per the 2008 amendment to the definition of "excisable goods," requiring separate accounts for dutiable and exempted products.

3. The 2008 amendment included an explanation deeming goods as marketable if capable of being bought and sold. While sawdust was deemed marketable, the question of it being a manufactured product was raised. The appellant, a plywood manufacturer, did not register for sawdust manufacture, indicating it was a byproduct. Marketability alone does not establish it as a manufactured product under excise laws.

4. The Tribunal found that sawdust, being a byproduct of plywood manufacturing, did not meet the criteria of being consciously manufactured. Marketability alone does not suffice for excisable goods classification. Consequently, the demand on the appellant was not sustainable, leading to a waiver and stay on the adjudged dues.