2015 (8) TMI 833 - AT - Central Excise

Duty demand - Duty on fly ash - whether fly ash obtained by burning of coal in the boiler the course of manufacture of sponge iron is dutiable - Held that - Fly ash is not containing metal or metal oxide. Though the ash obtained by the incineration of municipal waste and other type of ash is covered under heading 2621, the Tribunal in series of judgements mentioned above, as held that such fly ash is not excisable - Tribunal in the case of Shaw Wallace Gelatines Ltd. 2001 (3) TMI 379 - CEGAT, NEW DELHI has been held that coal ash is obtained from burning of coal as fuel for production of steam, is not an excisable product and not leviable to duty under heading 26.21 of Central Excise Tariff. The same view has been taken by the Apex Court in the case of Union of India vs. Ahmedabad Electricity Co.Ltd. (2003 (10) TMI 47 - SUPREME COURT OF INDIA). It is settled law that just because an item is covered some heading/sub-heading of the tariff, it would not become excisable, unless there is evidence on record to prove that the same is marketable in the sense that it is worthwhile to trade in that product and there is existence of market for the same. It is also well settled law that the burden of proving the marketability is on the department. In this case, the appellant is not selling the fly ash and the appellant offered the same free to any person who was ready to lift the same. The department has not been able to prove with tangible evidence that there is existence of market for the ash. - appellant have made a strong prima facile case in their favour.- Decided in favour of assessee.

Summary

Issues:
Classification of fly ash for excise duty under chapter 26.

Analysis:
The appellant, a manufacturer of sponge iron, faced a demand for excise duty on the clearance of fly ash arising from burning coal in the boiler. The department contended that fly ash falls under chapter 26 and is excisable, attracting a 5% duty. A show cause notice was issued, leading to an Order-in-Original confirming the duty and imposing a penalty. The Assistant Commissioner and the Commissioner (Appeals) upheld this decision, prompting the appellant to file an appeal challenging the order.

The appellant argued that the fly ash was not specifically classified under chapter 26, was not marketable, and was offered for free disposal to anyone willing to lift it. They cited precedents where similar fly ash instances were deemed non-excisable. The Tribunal and the Apex Court had previously ruled that certain types of ash, like boiler ash in sugar manufacturing or coal ash for steam production, were not excisable under heading 26.21. The burden of proving marketability rested on the department, which failed to provide concrete evidence of a market for the fly ash.

After considering both sides' arguments and reviewing the records, the Tribunal noted that the fly ash did not contain metal or metal oxide. Relying on previous judgments, the Tribunal emphasized that mere classification under a tariff heading did not automatically render a product excisable. The crucial factor was the marketability of the product, which the department failed to establish in this case. As the appellant had a strong prima facie case in their favor and no evidence of marketability was presented, the Tribunal waived the pre-deposit requirement for the duty demand, interest, and penalty, allowing the appeal to proceed with a stay on recovery.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the fly ash obtained during the manufacture of sponge iron was not dutiable under chapter 26 due to the lack of evidence proving its marketability, thereby granting relief from the duty demand, interest, and penalty.